Signs of distress among Midland businesses fell in the last quarter of 2011 compared to the previous quarter, according to new figures.
The latest Business Distress Index, published by national insolvency body R3, shows just over half of companies in the region, 53 per cent, reported suffering from key distress indicators, such as falling sales, decreased profits and cash flow difficulties, compared to 69 per cent in the previous quarter.
The report also highlights that only three per cent of Midlands businesses have had to make redundancies, compared to the national average of eight per cent, while 10 per cent are finding it difficult to pay invoices on time, compared to 14 per cent nationally.
Conversely, more than one in three, 35 per cent, of Midland businesses have seen a reduction in sales volume, while the national average is lower at around one in four, 28 per cent.
However, the figure for those Midlands businesses experiencing decreased profits, 32 per cent, is lower than the national average, which stands at 34 per cent.
R3 Midlands chairman Matthew Hammond, a partner at PwC in the Midlands, said: “Whilst consumer confidence remains low and businesses are still showing significant signs of distress, there does appear to be a distinct upturn in the regional situation.
“However, we have to take a pragmatic view and consider whether this could be the calm before the storm.
“Many ‘zombie’ businesses in the Midlands have been surviving, but not thriving, and we know that the vast proportion of businesses do not fail in the middle of a recession but when the economy is recovering.
“This ‘insolvency lag’, which has been evident in previous recessions, is certainly a distinct possibility.”
The R3 research also highlights the struggle for survival that small and medium enterprises (SMEs) are still facing compared to larger corporates.
Nationally, over a quarter, 29 per cent, of SMEs have seen a reduction in sales volumes compared to six per cent of big businesses.
More than a third, 34 per cent, of SMEs are experiencing decreased profits compared to 19 per cent of big businesses.
Mr Hammond added: “The Government has created a number of schemes to support SMEs in recognition of the key role they play in maintaining the health of the economy.
“However, these businesses need more help to survive this difficult economic environment.
“It is clear that many SMEs are not financially robust enough to withstand the economic pressure.
“Ultimately, more business support is needed in 2012 to facilitate a successful economic recovery.”
SMEs are defined as businesses with a turnover up to £20million and large businesses are defined as those with a turnover of over £20million.