March 11, 2011
Research by insolvency trade body R3 has discovered that one in six British businesses could be trading while "technically insolvent".
R3’s Business Distress Index claimed that about 268,000 companies reported having difficulty paying their invoices on time during the final quarter of 2010. On top of the subsequent arrears, 54% of firms reported a decrease in profits over the past quarter, up 5% on late 2010.
Worryingly, figures released last month showed that a record number of Scottish firms went to the wall last year.
"The overall picture indicates that conditions have got more challenging from September to December last year - though we must remember that during this period businesses were affected by the adverse weather conditions,” said John Hall, R3's Scottish Council Member.
"However, the increase in businesses struggling to pay bills on time is worrying as this is the technical definition of insolvency.
The R3 index revealed a 4% jump in the number of businesses making redundancies and a 3% increase in those introducing pay cuts or freezes.
"This - coupled with an increase in the number of businesses using the maximum overdraft facility, which stands at one-in-five - suggests many businesses are running on empty," added Mr Hall.
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