Subsequently, new research from recovery practice Begbies Traynor has revealed that over 275,000 companies were showing significant signs of financial distress at the end of last year.
On a year-on-year basis, the research shows that corporate stress rose for the 13th consecutive quarter towards the tail end of 2016.
Showing that there were 276,518 businesses experiencing ‘significant’ financial distress in the fourth quarter of 2016, they reported a 3% increase on 2015.
Over 90% of those surveyed were small and medium-sized enterprises (SMEs) and nearly a quarter of them were based in the capital.
In London alone, 64,764 SMEs ended the year in some sort of financial distress – representing an increase of 5% from the previous year.
Julie Palmer, partner at Begbies Traynor said:
“With the World Bank revising down its growth forecasts for the UK, alongside reports that the UK’s trade deficit widened to a worse-than-expected £12.2bn in November, our data shows that levels of financial distress continue to rise across the country, most of all within the UK’s important SME community, which is widely regarded as the lifeblood of the economy.”
“The scale of SME distress at the end of 2016 just goes to highlight the fragility of UK micro businesses, many of which are underfunded, lack management experience or are flawed in concept.”
The number of start-up companies joining the UK market hit its highest levels since the start of the financial crisis, with 685,000 new businesses created by the end of 2016.
But sadly, the reality is that many start-ups are short lived and the majority of start-ups fail in their first two years.
Begbies Traynor warned of start-ups failing due to the changing circumstances, adding that out of the 470,000 companies incorporated in 2011, more than 55% have been dissolved or entered formal insolvency procedures.
A defining year for SMEs
Executive chairman of Begbies Traynor, Ric Traynor stated that ‘2017 could be a defining year’ for small businesses.
"Despite finishing the year in a state of heightened financial stress, it is too early to say that this is reflective of an underlying problem that is likely to continue or negatively impact 2017, as numerous macro indicators suggest that the New Year has got off to a reasonable start.”
"EU exit negotiations and US trade policy could be major factors affecting business this year either for better or worse whilst rising inflation and fluctuating exchange rates are likely to have a negative impact. Either way, 2017 could well be a defining year for UK business."
How can you revive your struggling business?
Find the problem
A business can fail for a number of reasons, and it’s never easy to look objectively at your problems.
Look back at the times when your sales were strong and you were making a good profit and figure out what changed.
- Was it the arrival of a competitor?
- Have you failed to update your products or diversify you offering?
- Has the demographic of the are changed?
Refresh your marketing
Every business owner knows that it’s crucial to understand your customer base.
But if you only advertise in print, when most of your customers now shop online, then they won’t be seeing your adverts.
Or if you do actively advertise online and your marketing efforts have flopped, try retargeting your adverts, mail outs and pricing.
Hone your digital skills and get social – try different platforms and interact with your customers on a one on one basis, use geographically targeted offers and offer vouchers or discounts for your followers and friends.
Diversify your offering
Look at other businesses in the same sector – what do they offer that you don’t? and how can you make your product or service better than theirs?
A common problem for small businesses is that their product hasn’t changed but their customers have.
Changing your offering to reflect the changing demands and desires of your customers is a sure-fire way to rejuvenate your business.
Cut your costs
No business owner wants to shrink their business, but sometimes it’s the only option. You may be able to close a location temporarily, hire less staff, or outsource your employees rather than pay for full-time permanent workers.