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Small firms believe economy not in recovery 6 September 2013

Almost half of businesses in the UK disagree with Chancellor George Osborne’s statement that the economy has moved “from rescue to recovery”, according to research by insolvency trade body R3.

The latest Business Distress Index from R3, which surveyed 501 businesses, found that 49% of companies disagreed with the Chancellor, compared to the 42% which agreed with him.

Opposition to Osborne’s comment on the state of the UK’s economy was strongest among small businesses with a turnover of between £50,000 and £1m, of which 51% do not believe it is in the “recovery” stage.

However, 55% of large firms with a turnover of more than £1m, agreed with the Chancellor, while 35% disagreed.

Liz Bingham, president of R3, said: “Larger businesses may well be confident that they can ride out any remaining bumps on the road to recovery, but small businesses still face significant pressures, whether it’s access to finance or simply the pressures of growing demand.”

She added: “It is easily forgotten that one of the most dangerous times for a business is immediately after a recession, when a lack of investment as a result of recessionary cutbacks and the stress of servicing growing demand take their toll.

“While it might look like economic recovery is taking place, it may not feel that way for businesses on the frontline just yet.”

But R3 claimed that its Business Distress Index found the UK’s business community in “increasingly robust shape”.

Some 35% of companies reported at least one sign of distress, down from 40% in March this year and from 53% in June 2012.

At the same time, 53% of businesses saw at least one sign of growth, such as investment in new equipment, business expansion, sales growth, increased market share or increased profits, compared to 47% in March.

Among large firms, 70% recorded at least one sign of growth, while 51% of small businesses were in the same position.

Since the last index, 53% of businesses reported being more optimistic about the health of the economy – the highest level since this was first measured in 2011 and up from 39% in March.

Bingham said: “These indicators may be up on where they were at the beginning of the year, but they are actually lower than they were a year ago.

“If economic growth is to be sustained, we will need to see improvement in the growth indicators in the coming months.”



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