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SOUTH EAST BUSINESSES STILL PROFITABLE IN WAKE OF BREXIT VOTE

UK businesses are still showing signs of growth in the aftermath of the EU referendum according to new research by insolvency and restructuring trade body R3.

According to the long-running survey of South East businesses, 56% reported at least one sign of business growth, down from 70% in June. Of the individual indicators, while there was a slight decline in the numbers experiencing increasing sales volume since June (34% v. 43%), there was a noticeable rise in profits (30% v 24%).

Andrew Watling, chairman of Southern Committee of R3 and partner at Quantuma in Southampton, says:

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“In the lead-up to the referendum businesses were displaying record-high signs of growth and while the rate has slowed, the immediate impact of the vote on businesses appears to be limited.

“In fact, more businesses are seeing their profits grow. This could be attributed to the strong rate of consumer spending which having initially dipped after the vote, rebounded quickly.”

This week MHI Vestas has announced the creation of 70 new jobs at their Stag Lane wind turbine manufacturing plant.

The R3/BDRC research does however show that signs of distress are up, with 20% of businesses experiencing indicators of distress, compared to 9% in June.

One indicator of distress showed improvement since the previous survey, with those regularly using maximum overdraft decreasing (2% v. 3%). Those experiencing decreasing market share (5% v. less than 1%) and making redundancies (2% v. 1%) both increased from June.

Andrew adds:

“It’s still early days but the vote hasn’t translated into tangible problems for most companies. It’s particularly positive to see the lowest level of businesses regularly relying on their overdrafts. While we’re currently in an environment where borrowing is cheap and interest rates are at record lows, constantly depending on credit can easily lead a business into trouble in the long-term.

46% per cent of South East businesses are more optimistic about the economy generally than three months ago, 29% are more pessimistic and 25% are neither.

However, the research shows that the proportion of businesses that expect their business activity to increase in the next year fell from 34% in June to 33% in September. The majority (62%) expect it to stay the same, while only 3% expect it to decrease.

Andrew concluded:

“While a considerable degree of uncertainty remains about when and how the UK will exit the EU, the majority of businesses believe that the next year won’t bring considerable change to their business activities. It will be some time before the UK’s relationships with the EU is formally altered so for the time being businesses should carry on as normal.”

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