The quarterly Business Distress Index revealed that more businesses were reporting decreased turnover, falling market share and cash flow difficulties and the number of liquidations is on the rise.
There are now almost eight per cent more companies being liquidated or given a winding up order over the last three months compared to the previous quarter and a 20 per cent rise on the same period last year.
And research by the Centre for Economic and Business Research (CEBR) suggests that more small businesses intend to lay off staff in the next three months.
Charles Davis, economist at CEBR, said: “Companies relying on discretionary expenditure are especially negative, with the leisure, sports and entertainment and hospitality sectors showing the largest drops in confidence of any.”
Almost 80 per cent of the businesses reported cost rises compared with a year ago, with a third reporting the increases were “significant”. Utility bills, raw materials, labour and rents all rose steeply, the firms reported.
There is also a national divide in optimism, with confidence in the West Midlands and South West falling fastest and a marked divide between optimism in the South East and the rest of the country.
John Walker, National Chairman of the Federation of Small Businesses, said the Chancellor should respond to the collapse in confidence by extending national insurance (NIC) tax breaks designed to encourage new firms to hire more staff and by cutting VAT.
“As businesses come to terms with the double whammy of falling revenues and rising costs, it is no wonder that they’re losing confidence, and unfortunately, as their overheads increase one way to control it is to lay off staff,” he said.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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