A surge in operating costs and decline in new orders has caused the financial health of UK companies to deteriorate during the six months to April 2011.
That is the conclusion of the latest small and medium sized Enterprise Trends Index, which compiled the responses of over 550 business owners to determine the financial and growth prospects for UK businesses.
Over 75% of respondents said that operating costs have risen over the past six months, while only 58% countered these rising overheads by winning new contracts during the same period.
Meanwhile, the overall Business Health Index fell to 0.35 – down from the 0.49 recorded last November – and it seems that bigger companies are generally in far better shape than small firms. Indeed, while companies with a turnover of more than £3m recorded an average index score of 1.67, those turning over less than £500,000 had an average of -0.13.
Companies in Wales (index score 1.10), eastern England (0.91) and the South East (0.64) were found to be the best performing regions by the Enterprise Trends study.
Evette Orams, managing director of debt collection agency Hilton-Baird Financial Solutions, which compiled the research, said that in spite of the economic growth recorded during the first quarter of 2011, “trading conditions remain challenging”.
Orams said that this is due to a combination of factors, such as the implementation of the government’s spending cuts, January’s rise in VAT and December’s restrictive weather.
She added: “The onus is therefore on business owners to secure the funding solution that maintains their cash flow and provides the greatest opportunity for growth over the next few months, assessing all viable options and selecting the funding that fits their needs.
“The fact that invoice finance and asset finance users are once again financially stronger that those using more traditional forms of finance demonstrates the benefits such targeted funding can provide, and we urge businesses to ensure they have the right funding in place to assist with their business’ strategy.”