Member Article

Rising cost of fuel biggest obstacle to growth

Over a third (38%) of businesses in Yorkshire and the Humber state that the rising costs of fuel and utilities is the biggest problem they face, slightly higher than the national average of 32%.

This is followed by reduced consumer spending, identified by 34% of respondents in the region and 26% across the UK.

The survey of over 500 businesses carried out by insolvency trade body R3, also revealed that only 7% of businesses in the region (5% nationally) identified an inability to secure further credit or a bank loan as a main problem.

Robert Adamson, chair of R3 in Yorkshire and northern head of restructuring services at Mazars, commented: “Concerns over utility bills and revenue show that businesses still feel they are being squeezed on both sides. Businesses depend on utilities to operate, making it hard to cut costs.

“With consumers unwilling to spend, businesses will be increasingly concerned about their margin. At least access to credit has slipped away as an issue, perhaps businesses are deleveraging where possible and getting used to life with reduced access to credit.”

However, the number of businesses in Yorkshire and the Humber reporting that they regularly used their maximum overdraft rose from 3% in November to 6% in the latest survey; and 36% in the region have seen reduction in sales volume, an increase of 17%. This contrasts with the national picture which shows both of these distress indicators improving.

The number of businesses reporting growth indicators has fallen since November 2012 from 51% to 47% nationally. For example, in Yorkshire and the Humber, businesses reporting investment in new equipment fell from 47% in November to 22% in the latest survey.

Mr Adamson added: “Business growth is still very hesitant. Although so few businesses said that access to bank lending was a problem, this could also indicate that many businesses are not even bothering to go to banks for funding. While things aren’t getting worse, they aren’t improving either.

“Decreasing numbers of businesses ‘in distress’ will not automatically lead to economic growth. Recent data from Experian identified the growth of ‘gazelle’ businesses, those mid-sized businesses with significant growth over the past three years, but these cases are still relatively small. Their numbers will have to increase to overtake the zombie numbers which we estimate are still much higher.”

This was posted in Bdaily's Members' News section by Mark Lane .