Statistics indicate a rise in company closures, despite growth in the economy and a positive forecast for 2014

Recent independent reports published by the Office for National Statistics (ONS) and the Organisation for Economic Co-operation and Development (OECD) show positive news for the UK economy, with both actual growth and predicted growth for 2014.

•    ONS results reveal a growth in the UK economy by 0.8% in the first quarter of 2014
•    OECD predicts a UK growth of 3.2% for 2014, up from its forecast of 2.4% just six months ago.

However, despite this positive news for the economy, statistics released in the same month by the Insolvency Service showed an increase in compulsory liquidations and creditors’ voluntary liquidations by 4.8% on the previous quarter, and 4.9% more than the same quarter in 2013.

Andy Pear, Partner at BM Advisory, the restructuring, recovery and insolvency specialists, comments:

“It is not uncommon to see a rise in insolvencies when a country is lifting itself from recession. A key reason for this is that growth amongst customers and suppliers will often result in increased working capital requirements, leading to extended payment terms and cash shortages.

“Whilst the OECD predictions are enormously encouraging, business owners must be wary of the dangers that may arise from over trading, whereby a business sells too much too quickly, grows too fast, and essentially runs out of cash.”

Here are six key signs your business may be at risk of over-trading:

1.    Outgoings exceed actual cash flow and you are borrowing money to keep up
2.    Profits are down and margins are tight
3.    Employees are over-worked and unhappy – productivity is falling
4.    Emphasis has shifted from quality to quantity
5.    Customers are complaining and losing confidence
6.    Infrastructure, systems and process are buckling under the pressure of the increase in demand for your product or service

“Business owners must make sure that they plan for growth effectively,” Andy continues. “It is essential that they be aware of the telltale signs that their business is growing too quickly by keeping a close watch on three key areas – systems, staff and cash reserves.

“But it’s important for business owners to remember that if they are experiencing difficulties, or concerned about business performance, the earlier they seek help from a specialist adviser, the wider the recovery options available to them.”

For more information about how BM Advisory can help improve your business’ operational and financial performance, contact Andy Pear on 020 7549 8050.