It’s been a tough time for business over the past few years, with the recession and various financial scandals hitting everyone from the smallest online retailer to the biggest and most well established names.
From the original, very negative, predictions for business survival have come tales of hope for companies that have found new ways to keep themselves afloat in what have been extremely challenging circumstances.
The Office for National Statistics has recently released statistics revising the state of the UK economy and showing that, rather than a 1% contraction, the growth rate of the UK economy remained flat at the start of 2012, which means that the country did not experience a double dip recession as was first thought. However, economists have commented that whilst this news might be positive, figures now show that the recession in 2008 was actually deeper than it was thought at the time with GDP estimated to have dropped 7.2% peak to trough, rather than the 6.3% first published.
So, what do the revisions of the figures mean for individuals and businesses? Not an awful lot, although there is obviously a difference in perception between a double dip recession and the second ‘dip’ simply being flat. We are still in a position where the UK economy is trundling along with limited signs of recovery, business lending is severely limited and consumers continue to really feel the pinch with real household income falling in the first quarter of 2013 more than in any quarter since 1987.
Reactions to this in the business community have ranged from cutting losses and shutting up shop to being forced into new markets. A lack of confidence has also seen many businesses ‘hoarding’ reserves instead of investing and this, combined with the low levels of borrowing being offered by UK banks, has led to a lower overall level of business debt.
The positive side of this is that in the first half of 2013 the number of businesses facing debt judgments in the UK fell. The Registry Trust, which is the government’s recorder of judgments, said that there was an 8% drop in judgments as compared to the first quarter of 2012, with 59,895 judgments issued against UK businesses in the first half of this year. The figures for this year are around half those that were recorded when judgments were at their peak in 2009.
Although this seems much like positive news for the UK business sector, the lack of debt judgments doesn’t necessarily mean that problems with debt for UK businesses have gone away. Registry Trust chairman, Malcolm Hurlston highlighted this when he said, ‘On average in the first half of this year more than 270 businesses every working day have been issued with a debt judgment.’
It is also worth bearing in mind that the government has been encouraging debt issues to be settled outside of the court system and those would not be reflected in these figures. However, there was also a fall in the number of company liquidations in the second quarter of 2013, by 2.1% to 3,978 according to figures issued by the Insolvency Service. So it seems that whilst the complexity of gauging the state of the UK economy in terms of the kind of environment it presents for business can’t be underestimated, perhaps there is a glimmer of light after all.