What's the forecast for struggling businesses?

27th November 2017 by Mark Upton

One of the key highlights that came out of the Chancellor’s statement last week was the down grading of the growth estimates for the economy for this year from 2% that was forecast in March to 1.5% now being predicted.  Growth is expected to remain at these levels for some time based on lower than previously forecast productivity levels and lower levels of business investment.  Growth in wage levels is expected to remain low with some forecasters predicting that it will not be until 2025 that real wages return to pre-crash levels.

If we throw the uncertainty surrounding what a post –Brexit economy is going to look like and what trading relationships the UK is likely to have with Europe in the future,  it would seem that there is plenty for businesses to be concerned about going forwards.

However, in a recent R3 Growth survey businesses in the East of England were bucking the national trend in that 64% of businesses in the region were showing one or more signs of growth year on year compared to 59% this time last year and against a national picture of a fall from 62% to 53% revealing that businesses in our region have a more robust and confident outlook.

There are though still causes for concern as the number of businesses in the region showing at least one sign of distress jumped from 18% up to 28% and the weakness in the forecast growth and productivity figures may have a further impact on these businesses.  With no obvious forecast signs of improvement it may be that there will be an increasing number of so called ‘zombie’ businesses that encounter further financial distress.

There were measures announced by the Chancellor that will ease the ever increasing cost burden on businesses; namely the pegging of Business Rate increases to CPI rather than RPI from April 2018 rather than April 2020 and the scrapping of fuel duty increases that were proposed for April 2018. 
So, in summary, there were some concerning downgrading of forecasts that came out of the Chancellor’s statement and economic growth will remain weak for some time.  

Together with the uncertainty surrounding Brexit, business owners therefore need to plan and constantly review their finances and business strategy and ensure they take professional advice both in relation to growth and in the event that their business starts to show signs of financial distress.


Author

Mark Upton

Mark Upton

Partner
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