The financial health of UK businesses deteriorated during the six months to April 2011 as owners had to deal with a surge in operating costs and a fall in new orders, research finds.
According to the latest SME Trends Index, which draws on factors including bad debt levels, tax arrears, turnover and profitability to calculate the financial health of UK firms, the overall Business Health Index fell to 0.35 from the 0.49 recorded last November.
Of the 576 business owners questioned between March and April 2011 about their company’s finances and growth prospects, 76 per cent reported a rise in operating costs during the preceding six months and only 58 per cent won new contracts.
The Index incorporates the answers from two questions of each respondent to calculate an accurate gauge of their financial health, with the best possible score being +10.
Those companies with a turnover of more than £3 million (with an Index score of 1.67) remain significantly stronger than businesses turning over less than £500,000 (-0.13), while firms in Wales (1.10), eastern England (0.91) and the South East (0.64) are the best performing regions.
Businesses operating in the wholesale sector (1.38) are also showing promise, providing a stark contrast to the haulage (-1.93) and construction sectors (-0.88).
Evette Orams, managing director of Hilton-Baird Financial Solutions, which compiled the research, says, ‘In spite of the economic growth recorded during the first quarter of 2011, trading conditions remain challenging as a combination of factors, including the implementation of the government’s spending cuts, January’s rise in VAT and December’s restrictive weather, have arguably led to a deterioration in the financial health of UK SMEs.’
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