More than half North-East firms showing signs of growth, says R3 report (From The Advertiser Series)
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More than half North-East firms showing signs of growth, says R3 report
Updated 11:35am Tuesday 22nd July 2014 in Business
MORE than half of the businesses across the region are feeling direct benefits from the continuing economic recovery, according to the results of new research
R3’s latest Business Distress Index (BDI), which reports regularly on the successes and difficulties of hundreds of companies across the UK, showed that 55 per cent of firms in the North-East, Yorkshire and Humberside are showing at least one of the five key indicators of growth that it measures.
It comes as a separate report predicted the UK economy will grow faster in 2014 than any other G7 nation, while low wage rises will ensure interest rates do not rise until next year.
GDP growth will hit 3.1 per cent this year, spurred by strong capital investment by businesses, the EY Item Club said. This compares with 1.8 per cent growth in Germany, the body forecast
Meanwhile rates will not rise until the first quarter of 2015, it predicted.
"After several false starts, this time [the recovery] could be different," said EY's chief economist Mark Gregory.
R3's research also found that almost two thirds of businesses across the region are feeling more optimistic about their future prospects than they did three months ago, with just 6 per cent saying they were feeling worse.
However, the latest BDI also shows that signs of growth and distress are still uneven around the country, and while 73 per cent of businesses in the South are reporting at least one sign of growth, this falls to 59 per cent across the North.
R3 has tracked five key business indicators – investment in new equipment, increased sales volume, business expansion, increased profits, and growing market share - since March 2012, with each one measuring the share of regional businesses experiencing that particular sign of growth.
The region fares better than the UK as a whole on only one of these indicators, with 37 per cent of companies experiencing increased profits, compared to a national figure of 33 per cent.
Allan Kelly, North East chair of R3 and a restructuring partner in Baker Tilly North East, said: “The Business Distress Index continues to reveal positive results for the North East, and it’s encouraging that business growth isn’t yet showing signs of decelerating whilst the pace of the recovery is being kept up.
"However, while it’s good to see growth continuing apace in all the UK’s regions, Westminster needs to bear in mind the fact that the South is pulling further and further away from the rest of the country in terms of economic performance, and the commercial and employment implications if this trend continues.
“Despite the generally good news in our latest BDI, North East businesses still need to be aware of the that they don’t over-stretch themselves. Controlling the growth opportunities they’re clearly looking to secure is always one of the key challenges facing management teams as economies come out of difficult periods.
“Economic recovery is just as tough a time for some businesses to negotiate as a recession, if not tougher - insolvencies usually peak after a recession, but we haven’t seen that this time around, as record low interest rates and high levels of creditor forbearance have helped support lots of businesses.
"Sales, profits, and business expansion may be on the up, but if a business runs before it can walk then problems can emerge - logistics, information, finance, cash flow, and the operational side of a business all need to keep up with a business’ expansion, whether this is geographically or in terms of demand or sales.”