Experian’s survey of nearly 700 UK small businesses found that 71 per cent did not check their customers’ credit status, exposing them to a greater risk of being paid late or not being paid at all.
The survey also revealed that 39 per cent of small businesses did not know what a credit score was, while 61 per cent have never checked their own score. Businesses that do not check their scores are unlikely to be aware of any issues until they lose out on a contract with a potential new customer, are refused materials from a new supplier or are turned down for finance.
Simon Streat, Managing Director of Experian’s UK SME business, said: “Two thirds of small businesses may be blind to their credit scores, but their larger customers, suppliers and banks certainly won’t be.
“Failure to address credit problems may put small and medium sized businesses at a big disadvantage, as many organisations will be put off engaging with a company that has a low score. It is important for businesses to monitor their credit score on a regular basis to ensure it reflects their situation accurately and to be able to take action to resolve any issues that are highlighted.
Why does this situation exist when bad and doubtful debts are running at an all time high?
Tuesday 20 September 2011
Friday 26 August 2011
Friday 19 August 2011
Government should re-think on micro-business plan
The Institute of Credit Management (ICM) has launched a petition with Graydon UK, the commercial credit referencing agency, to prompt a Government rethink on plans to exempt micro-businesses from having to file accounts at Companies House – plans it believes will seriously hamper the economic recovery rather than encourage it.
The move follows the publication of figures from a recent survey of its 8000 Members that posed the simple question: if accounts for a potential customer wanting to place a relatively small order with you were not available at Companies House or via a Credit Reference agency, what would you do?
Nearly 37 percent said that they would not approve the order for immediate supply, reject the account and insist on cash in advance; 15 percent said they would accept the increased risk and trade anyway; and more than 48 percent said that they would ask the customer to provide financial data to support their application.
The findings support the ICM’s view that exempting micro business from filing accounts is wholly the wrong way of tackling what is a comparatively simple issue: businesses should be prepared to provide more information not less: “Without audited numbers that can be trusted, banks will not lend and suppliers will not extend credit to their customers,” says Chief Executive Philip King. “Growth will be restricted, not encouraged.”
The ICM’s survey follows similar research in June from Graydon UK that showed that 91 per cent of credit and finance professionals believe that the proposals will make it harder for small businesses to access trade credit, and that 87 per cent of respondents did not believe that the Government’s plans will help drive business growth.
'CreditMan' supports the ICM and Graydon UK and we urge you to support the petition, by going to: http://www.surveymonkey.com/s/8KGN5BH
The move follows the publication of figures from a recent survey of its 8000 Members that posed the simple question: if accounts for a potential customer wanting to place a relatively small order with you were not available at Companies House or via a Credit Reference agency, what would you do?
Nearly 37 percent said that they would not approve the order for immediate supply, reject the account and insist on cash in advance; 15 percent said they would accept the increased risk and trade anyway; and more than 48 percent said that they would ask the customer to provide financial data to support their application.
The findings support the ICM’s view that exempting micro business from filing accounts is wholly the wrong way of tackling what is a comparatively simple issue: businesses should be prepared to provide more information not less: “Without audited numbers that can be trusted, banks will not lend and suppliers will not extend credit to their customers,” says Chief Executive Philip King. “Growth will be restricted, not encouraged.”
The ICM’s survey follows similar research in June from Graydon UK that showed that 91 per cent of credit and finance professionals believe that the proposals will make it harder for small businesses to access trade credit, and that 87 per cent of respondents did not believe that the Government’s plans will help drive business growth.
'CreditMan' supports the ICM and Graydon UK and we urge you to support the petition, by going to: http://www.surveymonkey.com/s/8KGN5BH
Tuesday 26 July 2011
Q2 2011 administrations at the lowest level since before the financial crisis
Administration appointments in England are at their lowest level since Q4 2007, well before the current financial crisis, according to Baker Tilly Restructuring and Recovery LLP.
There were 553 administrations from 1 April to 30 June 2011 which is a 14% decline on the first three months of 2011 (643) and fall of 13% against Q2 2010.
The figures, compiled from advertised administration appointments in The London Gazette, show a decline across all regions in England except for the North East which has seen a modest increase.
Are we seeing the light at the end of the tunnel as far as administrations are concerned?
There were 553 administrations from 1 April to 30 June 2011 which is a 14% decline on the first three months of 2011 (643) and fall of 13% against Q2 2010.
The figures, compiled from advertised administration appointments in The London Gazette, show a decline across all regions in England except for the North East which has seen a modest increase.
Are we seeing the light at the end of the tunnel as far as administrations are concerned?
Monday 11 July 2011
Retail insolvencies are on the up whilst manufacturing are down.
The UK’s multiple retailers closed 20 stores a day on average across the UK between January and the end of May this year, according to data compiled on behalf of PwC by the Local Data Company (LDC). The data also revealed that across multiple retailers in 300 town centres, clothes, shoe shops and jewellers have been amongst the hardest hit in 2011. Supermarkets, convenience stores and cafes have bucked the trend showing growth in the first half of the year.
PwC’s latest retail insolvency statistics for Q2 2011, released kast week, have also revealed that there were 375 retail insolvencies this quarter, 9% more than the same time last year.
PwC research indicates that, since the start of the recession, financially troubled retailers have closed, or plan to close, on average half their store portfolios as the high street comes under increased pressure. PwC examined the announcements of eight high profile failed or struggling high street retailers and found that on average 51% of the total store portfolio have or could be closed.
In contrast manufacturing insolvencies are down 26% in second quarter.
It remains to be seen if these trends will continue.
PwC’s latest retail insolvency statistics for Q2 2011, released kast week, have also revealed that there were 375 retail insolvencies this quarter, 9% more than the same time last year.
PwC research indicates that, since the start of the recession, financially troubled retailers have closed, or plan to close, on average half their store portfolios as the high street comes under increased pressure. PwC examined the announcements of eight high profile failed or struggling high street retailers and found that on average 51% of the total store portfolio have or could be closed.
In contrast manufacturing insolvencies are down 26% in second quarter.
Data also from PwC confirms that manufacturing and construction have been the hardest hit sectors since 2009, although both did slightly better in the second qurter of 2011 than the first three months.
In total, 4,058 manufacturing companies collapsed between Q3 2009 and Q2 2011. The retail sector has also been badly hit more recently, with announcements from Thorntons clouding the skies of the UK recovery. In the same period, the retail sector has seen 3,513 companies collapse.
The reason for hope came from the comparison between Q1 and Q2 of this year – manufacturing insolvency was down by 26.5%. PwC’s manufacturing spokesperson Philip Hines said: “There still remains uncertainty over current manufacturing order levels and the continued strength of the recent manufacturing recovery. Unfortunately this could imply further insolvencies in the second half of this year."
It remains to be seen if these trends will continue.
Wednesday 15 June 2011
HMRC faces huge loss in tax debt after letting companies put off paying bills
Time to Pay scheme to help struggling businesses through the recession has racked up at least £650m in tax debt.
New figures show there is just under £1bn outstanding as part of the government's "Time to Pay" arrangements. The scheme enabled HM Revenue & Customs to strike deals with struggling businesses to give them longer than usual to pay their tax bills.
Of that £1bn, £650m has not been paid as initially agreed by HMRC with the businesses concerned. The figures were obtained by R3, the insolvency trade body. It is understood that some businesses have seen their HMRC debts effectively rolled over four times, R3 said.
Frances Coulson, R3's president, said: "Time to Pay has played a vital role in preventing the spike in corporate insolvency numbers that usually follow the end of a recession, but these figures give rise to serious concerns about the way the scheme is operating."
"Time to Pay should be used as breathing space for businesses undergoing temporary difficulty. However, if a business is on their third or fourth referral, that should act as a warning sign; it indicates that there are underlying problems with its cash flow. It should make HMRC question the financial viability of that business."
Between the launch of the scheme in November 2008 and the end of March 2011, Time to Pay struck more than 400,000 deals, allowing breathing space on £7.4bn of tax debts.
The scheme was widely welcomed when it was introduced, but HMRC faces a challenge to unroll the arrangements. If the structures are dismantled too quickly as the economic situation improves, many businesses could go to the wall.
"Research shows that one in four corporate insolvencies is caused by another business going into insolvency," Coulson said. "This means that should the businesses who have had multiple Time to Pay arrangements fail, not only will the government be left out of pocket, but a considerable number of businesses would be left exposed."
HMRC sources insisted that the £650m debt was "collectable", and would be recouped either under new Time to Pay arrangements, or as part of normal debt collection procedures.
An HMRC spokesman said: "The majority of businesses that have entered into time to pay arrangements with us are fundamentally viable and are still in business in no small part due to the practical support provided by our time to pay arrangements.
"Around 90% of the tax that was rescheduled has been paid and this, coupled with the enormous benefits that small businesses deliver to the country through their tax revenues, jobs, and long-term expansion, strongly justifies our pragmatic approach."
The taxman could be facing a loss of up to £650m in tax debts it allowed to build up as part of arrangements to tide businesses over during the recession.
Of that £1bn, £650m has not been paid as initially agreed by HMRC with the businesses concerned. The figures were obtained by R3, the insolvency trade body. It is understood that some businesses have seen their HMRC debts effectively rolled over four times, R3 said.
Frances Coulson, R3's president, said: "Time to Pay has played a vital role in preventing the spike in corporate insolvency numbers that usually follow the end of a recession, but these figures give rise to serious concerns about the way the scheme is operating."
"Time to Pay should be used as breathing space for businesses undergoing temporary difficulty. However, if a business is on their third or fourth referral, that should act as a warning sign; it indicates that there are underlying problems with its cash flow. It should make HMRC question the financial viability of that business."
Between the launch of the scheme in November 2008 and the end of March 2011, Time to Pay struck more than 400,000 deals, allowing breathing space on £7.4bn of tax debts.
The scheme was widely welcomed when it was introduced, but HMRC faces a challenge to unroll the arrangements. If the structures are dismantled too quickly as the economic situation improves, many businesses could go to the wall.
"Research shows that one in four corporate insolvencies is caused by another business going into insolvency," Coulson said. "This means that should the businesses who have had multiple Time to Pay arrangements fail, not only will the government be left out of pocket, but a considerable number of businesses would be left exposed."
HMRC sources insisted that the £650m debt was "collectable", and would be recouped either under new Time to Pay arrangements, or as part of normal debt collection procedures.
An HMRC spokesman said: "The majority of businesses that have entered into time to pay arrangements with us are fundamentally viable and are still in business in no small part due to the practical support provided by our time to pay arrangements.
"Around 90% of the tax that was rescheduled has been paid and this, coupled with the enormous benefits that small businesses deliver to the country through their tax revenues, jobs, and long-term expansion, strongly justifies our pragmatic approach."
Wednesday 18 May 2011
Business failures leave directors liable for debt
As the latest insolvency figures reveal a harsh picture of trading conditions for the UK’s small businesses and self-employed, business owners are cautioned against using personal credit to help keep their business afloat.
According to the Insolvency Service, self-employed bankruptcies made up 18.9 per cent of all bankruptcies in quarter 4 2010 – a higher proportion than in recent quarters.
Businesses in the hospitality arena are experiencing the biggest difficulties with personal bankruptcies from business debts, up by 60 per cent, followed closely by wholesalers, retailers and property developers.
Atlantic Financial Management has seen a stark rise in the number of company directors and owners in serious financial problems, owing in part to the fact they have used their personal credit cards to support their business.
Kevin Still, director at Atlantic, said: “Whilst it is encouraging that the level of personal bankruptcies and IVAs are down, the real concern is the increase in failure rates of both small and medium sized companies and the knock on effect this will have.
James Falla, personal debt expert at beatmydebt.com agrees.
"Since the onset of the credit crunch, small business owners and directors have been forced to fund their businesses with personal debt and by borrowing from friends and family. As the number of small businesses which fail increases, more and more business owners will be unable to fund the debt they have taken on personally" Falla warned.
According to the Insolvency Service, self-employed bankruptcies made up 18.9 per cent of all bankruptcies in quarter 4 2010 – a higher proportion than in recent quarters.
Businesses in the hospitality arena are experiencing the biggest difficulties with personal bankruptcies from business debts, up by 60 per cent, followed closely by wholesalers, retailers and property developers.
Atlantic Financial Management has seen a stark rise in the number of company directors and owners in serious financial problems, owing in part to the fact they have used their personal credit cards to support their business.
Kevin Still, director at Atlantic, said: “Whilst it is encouraging that the level of personal bankruptcies and IVAs are down, the real concern is the increase in failure rates of both small and medium sized companies and the knock on effect this will have.
James Falla, personal debt expert at beatmydebt.com agrees.
"Since the onset of the credit crunch, small business owners and directors have been forced to fund their businesses with personal debt and by borrowing from friends and family. As the number of small businesses which fail increases, more and more business owners will be unable to fund the debt they have taken on personally" Falla warned.
Thursday 12 May 2011
Retail industry failures
The latest statistics from the Insolvency Service have shown a substantial rise in the number of retail administrations and retail company voluntary arrangements (CVAs) for the first quarter of 2011, compared with the last quarter of 2010. Administrations in retail have seen a 55% jump from 80 in the Q4 2010 to 124 in Q1 2011, while CVAs in retail have risen by 30% from 23 in Q4 2010 to 30 in Q1 2011. The overall number of administrations was up by nearly a quarter from 642 in Q4 2010 to 782 for Q1 22%.
Brian Green, restructuring partner at KPMG, commented:
“The figures show that the disparate negative economic indicators putting pressure on consumers are materialising in business failure. There is definitely a sense that the extended period of treading water, enabled by low interest rates, is coming to an end. The pain is not just being felt on the high street; the overall number of administrations went up by 22% in the first quarter of the year, compared with the last quarter of 2011. On a positive note, a discernible increase in corporate insolvency shows that lenders are starting to take definitive action on distressed situations, signalling the bottom of the market and the upturn which follows is on its way.
“The recession this time around has been different to those which have gone before in that the severe crash, typical of an economic downturn, has been avoided. While it has been shown that an economic fall can be cushioned, the underlying financial problems – such as too much debt and reduced demand - still need to be resolved and it now feels like we are reaching the end of the insolvency hiatus and activity is increasing.”
Do you agree or do you think retail insolvencies will increase even further?
Brian Green, restructuring partner at KPMG, commented:
“The figures show that the disparate negative economic indicators putting pressure on consumers are materialising in business failure. There is definitely a sense that the extended period of treading water, enabled by low interest rates, is coming to an end. The pain is not just being felt on the high street; the overall number of administrations went up by 22% in the first quarter of the year, compared with the last quarter of 2011. On a positive note, a discernible increase in corporate insolvency shows that lenders are starting to take definitive action on distressed situations, signalling the bottom of the market and the upturn which follows is on its way.
“The recession this time around has been different to those which have gone before in that the severe crash, typical of an economic downturn, has been avoided. While it has been shown that an economic fall can be cushioned, the underlying financial problems – such as too much debt and reduced demand - still need to be resolved and it now feels like we are reaching the end of the insolvency hiatus and activity is increasing.”
Do you agree or do you think retail insolvencies will increase even further?
Thursday 21 April 2011
Prompt Payment Code reaches major milestone
More than 1000 businesses have now signed the Institute of Credit Management (ICM) led pledge for big businesses to live up to their word to pay on time by becoming signatories to the BIS backed Prompt Payment Code (PPC).
Major sponsors of the code include Barclays, RBS, HSBC, Santander and NatWest, all playing a part in a campaign designed to help increase the speed of payments to smaller companies.
Philip King, Chief Executive of the ICM, says that this is yet further proof that some of the biggest names in UK and world business are keen to be involved in a scheme that will help smaller suppliers stay afloat during these toughest of times: “With the Government’s backing this campaign is gaining real momentum and the list of high profile firms already involved, and others showing an interest is testament to that.”
The Code is hosted by the ICM on a dedicated website (www.promptpaymentcode.org.uk) and includes a facility for suppliers to raise concerns about late payers. The Code focuses on three main areas: a commitment to pay suppliers on time; to give clear guidance to suppliers; and to encourage good practice.
Major sponsors of the code include Barclays, RBS, HSBC, Santander and NatWest, all playing a part in a campaign designed to help increase the speed of payments to smaller companies.
Philip King, Chief Executive of the ICM, says that this is yet further proof that some of the biggest names in UK and world business are keen to be involved in a scheme that will help smaller suppliers stay afloat during these toughest of times: “With the Government’s backing this campaign is gaining real momentum and the list of high profile firms already involved, and others showing an interest is testament to that.”
The Code is hosted by the ICM on a dedicated website (www.promptpaymentcode.org.uk) and includes a facility for suppliers to raise concerns about late payers. The Code focuses on three main areas: a commitment to pay suppliers on time; to give clear guidance to suppliers; and to encourage good practice.
Two-thirds of UK businesses taking a harder line against debtors but compulsory liquidations continue to fall
Nearly a quarter (23 per cent) of UK businesses have issued fewer winding up petitions over the past year, despite 66 per cent of firms claiming they have been taking a tougher approach to dealing with debtors, according to a new poll of professional credit managers undertaken by Graydon UK, a commercial credit reference company.
Latest UK Government insolvency statistics have shown that corporate liquidations continued to fall during the fourth quarter of 2010 and have remained at far lower levels than in previous recessions.
According to the research 88 per cent of credit managers are turning to alternative methods in place of presenting a winding up petition with Country Court Judgments the tool most commonly used, by over half of (55 per cent) those surveyed. The research also found that 42 per cent of businesses are contracting third party debt collectors and 39 per cent setting up formal voluntary arrangements with debtors as they step up efforts to recover money owed to them.
Latest UK Government insolvency statistics have shown that corporate liquidations continued to fall during the fourth quarter of 2010 and have remained at far lower levels than in previous recessions.
According to the research 88 per cent of credit managers are turning to alternative methods in place of presenting a winding up petition with Country Court Judgments the tool most commonly used, by over half of (55 per cent) those surveyed. The research also found that 42 per cent of businesses are contracting third party debt collectors and 39 per cent setting up formal voluntary arrangements with debtors as they step up efforts to recover money owed to them.
Tuesday 12 April 2011
UK firms are still feeling the pressure
The Business Rescue Service recently issued advice and warnings to troubled UK businesses as news broke that business confidence remains tremendously low with many still battling financial problems. Following high company insolvency statistics last year, the International Business Report has found that just 8% of UK businesses expressed feeling confident in the current climate. Further research for the International Business Index described half of all UK SMEs as concerned about rising costs. A substantial number also felt access to funding and capital did not meet their needs.
Research for the International Business Report was conducted throughout Europe, with the UK identified with the lowest levels of business optimism bar Spain, Ireland and Greece. Whilst 16% of respondents had expressed feeling confident last year, just half of that number had this time around. 64% did not expect to be able to increase their pricing this year. 66% did not expect to increase their staff team in the year to come. There are also concerns among firms about inadequate access to lending facilities.
"16546 firms went into liquidation last year and clearly there are lingering serious issues. The most important message to get across is to seek advice sooner rather than later. Our financial analysis of the company's status is invaluable for planning purposes. We help to identify the direction they should be taking next. We also advise on Commercial Finance. In cases where the business rescue is not possible, we are on hand to advise on the most appropriate legal remedies. We would look to preserve the underlying business wherever possible, for example, by looking at whether pre-pack Administration could be an option. "
A survey of 1,500 small businesses in the UK for the forthcoming new International Business Index also found that there were widespread concerns about company finances. 19% felt lack of access to capital and funding was likely to present the greatest obstacle to success. 40% felt access to capital and funding within the UK was not currently adequate. 50% were concerned about rising costs and 55% planned to keep carefully monitoring their financial status. 46% relied on conducting their own business research using the internet.
Research for the International Business Report was conducted throughout Europe, with the UK identified with the lowest levels of business optimism bar Spain, Ireland and Greece. Whilst 16% of respondents had expressed feeling confident last year, just half of that number had this time around. 64% did not expect to be able to increase their pricing this year. 66% did not expect to increase their staff team in the year to come. There are also concerns among firms about inadequate access to lending facilities.
"16546 firms went into liquidation last year and clearly there are lingering serious issues. The most important message to get across is to seek advice sooner rather than later. Our financial analysis of the company's status is invaluable for planning purposes. We help to identify the direction they should be taking next. We also advise on Commercial Finance. In cases where the business rescue is not possible, we are on hand to advise on the most appropriate legal remedies. We would look to preserve the underlying business wherever possible, for example, by looking at whether pre-pack Administration could be an option. "
A survey of 1,500 small businesses in the UK for the forthcoming new International Business Index also found that there were widespread concerns about company finances. 19% felt lack of access to capital and funding was likely to present the greatest obstacle to success. 40% felt access to capital and funding within the UK was not currently adequate. 50% were concerned about rising costs and 55% planned to keep carefully monitoring their financial status. 46% relied on conducting their own business research using the internet.
Friday 11 March 2011
Government sends mixed messages on SME financial transparency
The Government’s intention to reduce still further SMEs' statutory filing requirements in order to reduce red tape is likely to prove to be counter productive by making it harder for small businesses to secure growth funding.
Business Secretary Vince Cable announced recently that the audit threshold for filing accounts at Companies House would rise from the current £5.6 million turnover per annum to £25 million, while exempting micro businesses with up to £1 million turnover from filing their accounts at all. It is estimated by the Government that the change will save SMEs up to £400 million pounds per year.
Martin Williams, Head of External Affairs at Graydon UK, commented; “As the Department for Business, Innovation and Skills seeks to reduce statutory filing requirements, HMRC has announced that it intends to target 50,000 small businesses this year in order to examine the quality of their book keeping. Those found deficient could incur financial penalties of up to £3,000. In effect, HMRC is saying keep good records, while the government appears to be recommending the opposite in the interest of fulfilling its promise to reduce red tape.
“The Government’s intention to relieve SMEs of administrative burdens is to be applauded but in a continuing uncertain funding environment the reality is that even less financial transparency will hold SMEs back, particularly if the economic recovery weakens further.”
According to Martin Williams, during the credit crisis as economic conditions changed rapidly, banks, credit insurers and trade suppliers sought greater financial transparency from SMEs before granting them credit. In many cases, where annual accounts filed at Companies House were suspected of being out of date, lenders began to ask in increasing numbers for up to date monthly management accounts to gain a better understanding of companies financial standing before granting them credit.
Philip King, Chief Executive of the Institute of Credit Management has commented: “As well as bank lending, businesses also extend credit to one another based on the trust that comes from knowing that the company they are lending to is financially viable, and one of the essential proof points is a set of audited accounts. Far from helping small businesses, the move is more likely to damage a company’s access to credit, restricting growth and in fact adding to their costs.”
Martin Williams has added; “Small businesses need to keep a proper ongoing check of their financial situation and should not be tempted to cut financial management corners in what is an essential part of running a business.”
Business Secretary Vince Cable announced recently that the audit threshold for filing accounts at Companies House would rise from the current £5.6 million turnover per annum to £25 million, while exempting micro businesses with up to £1 million turnover from filing their accounts at all. It is estimated by the Government that the change will save SMEs up to £400 million pounds per year.
Martin Williams, Head of External Affairs at Graydon UK, commented; “As the Department for Business, Innovation and Skills seeks to reduce statutory filing requirements, HMRC has announced that it intends to target 50,000 small businesses this year in order to examine the quality of their book keeping. Those found deficient could incur financial penalties of up to £3,000. In effect, HMRC is saying keep good records, while the government appears to be recommending the opposite in the interest of fulfilling its promise to reduce red tape.
“The Government’s intention to relieve SMEs of administrative burdens is to be applauded but in a continuing uncertain funding environment the reality is that even less financial transparency will hold SMEs back, particularly if the economic recovery weakens further.”
According to Martin Williams, during the credit crisis as economic conditions changed rapidly, banks, credit insurers and trade suppliers sought greater financial transparency from SMEs before granting them credit. In many cases, where annual accounts filed at Companies House were suspected of being out of date, lenders began to ask in increasing numbers for up to date monthly management accounts to gain a better understanding of companies financial standing before granting them credit.
Philip King, Chief Executive of the Institute of Credit Management has commented: “As well as bank lending, businesses also extend credit to one another based on the trust that comes from knowing that the company they are lending to is financially viable, and one of the essential proof points is a set of audited accounts. Far from helping small businesses, the move is more likely to damage a company’s access to credit, restricting growth and in fact adding to their costs.”
Martin Williams has added; “Small businesses need to keep a proper ongoing check of their financial situation and should not be tempted to cut financial management corners in what is an essential part of running a business.”
Monday 7 February 2011
What now for company insolvencies?
Administrations rose 1.4% to 642 in Q4 2010 (Q3 2010: 633). The latest figures reflect a 24.4% decrease on the same quarter a year earlier (Q4 2009: 849).
"This rise reflects the increasing pressure that many UK firms are facing. However, these figures are still way off their peak in Q1 2009, when 1,311 companies fell into administration," commented Malcolm Shierson, Partner at Grant Thornton's Recovery and Reorganisation practice.
Meanwhile, the number of companies entering liquidation saw a slight fall of 0.2% to 3,955 (Q3 2010: 3,964). The latest figures reflect a 11.3% decrease on the same quarter a year earlier (Q4 2009: 4,457).
"Whilst these figures could be said to indicate rising fortunes for the UK economy, dark clouds are looming on the horizon," continues Shierson.
"Increases in both direct and indirect taxes are starting to bite. The Government's austerity measures will increasingly impact on the private sector economy as the cuts accelerate. We are working with an increased number of distressed retailers, particularly those reliant on consumers making large discretionary purchases."
"Moreover, it is the growing probability of sustained rises in interest rates that poses the biggest threat to companies with obligations to service large debts."
R3 president, Steven Law, comments on the latest insolvency statistics:
Corporate insolvency statatistics
“The fact that corporate insolvencies in 2010 were lower than in 2009 suggests that this has been an atypical recession. HMRC’s Time to Pay scheme and the historically low interest rates have been effective at stemming the flow of insolvencies that usually occur post-recession. However it is important that businesses continue to carefully monitor their financial health as many will be affected by the implementation of recent fiscal policies.
“Businesses that rely on consumer spend will see their bottom line affected by the VAT increase as they try to absorb the tax or pass it on to their consumers which will have a negative effect on consumer-demand.
“Our research found that ten per cent of businesses describe themselves as reliant on public sector contracts and these businesses will be hit as the public sector cuts start to take effect this year. Our members believe that the construction industry will be the worst affected by the public sector cuts due to the reduction in capital spending in education and social housing.
Late payments by companies – an early indicator of weakening trading – have increased to the highest level in three years, Experian has warned.
Payments in the final quarter of 2010 bucked the slowly improving trend for the year by rocketing 16pc to an average of 25.7 days late, the information services company said.
Payments are "timely" indicators of company health and banks will scrutinise the data to inform lending decisions. They may respond by tightening credit conditions for small companies further.
"This rise reflects the increasing pressure that many UK firms are facing. However, these figures are still way off their peak in Q1 2009, when 1,311 companies fell into administration," commented Malcolm Shierson, Partner at Grant Thornton's Recovery and Reorganisation practice.
Meanwhile, the number of companies entering liquidation saw a slight fall of 0.2% to 3,955 (Q3 2010: 3,964). The latest figures reflect a 11.3% decrease on the same quarter a year earlier (Q4 2009: 4,457).
"Whilst these figures could be said to indicate rising fortunes for the UK economy, dark clouds are looming on the horizon," continues Shierson.
"Increases in both direct and indirect taxes are starting to bite. The Government's austerity measures will increasingly impact on the private sector economy as the cuts accelerate. We are working with an increased number of distressed retailers, particularly those reliant on consumers making large discretionary purchases."
"Moreover, it is the growing probability of sustained rises in interest rates that poses the biggest threat to companies with obligations to service large debts."
R3 president, Steven Law, comments on the latest insolvency statistics:
Corporate insolvency statatistics
“The fact that corporate insolvencies in 2010 were lower than in 2009 suggests that this has been an atypical recession. HMRC’s Time to Pay scheme and the historically low interest rates have been effective at stemming the flow of insolvencies that usually occur post-recession. However it is important that businesses continue to carefully monitor their financial health as many will be affected by the implementation of recent fiscal policies.
“Businesses that rely on consumer spend will see their bottom line affected by the VAT increase as they try to absorb the tax or pass it on to their consumers which will have a negative effect on consumer-demand.
“Our research found that ten per cent of businesses describe themselves as reliant on public sector contracts and these businesses will be hit as the public sector cuts start to take effect this year. Our members believe that the construction industry will be the worst affected by the public sector cuts due to the reduction in capital spending in education and social housing.
Late payments by companies – an early indicator of weakening trading – have increased to the highest level in three years, Experian has warned.
Payments in the final quarter of 2010 bucked the slowly improving trend for the year by rocketing 16pc to an average of 25.7 days late, the information services company said.
Payments are "timely" indicators of company health and banks will scrutinise the data to inform lending decisions. They may respond by tightening credit conditions for small companies further.
Wednesday 26 January 2011
In 2010 the annual rate of business insolvencies fell for the first time in two years
In 2010 the annual rate of business insolvencies fell for the first time in two years as the financial health of UK businesses improved, according to the latest Insolvency Index from Experian®, the global information services company.
1.04 per cent of UK businesses failed in 2010, compared to 1.25 per cent in 2009, the first annual drop for two years. The total number of insolvencies decreased from 24,209 in 2009 to 19,946 in 2010 - an 18 per cent drop.
March 2010 saw the greatest number of insolvencies for the year when 0.11 per cent of the total business population failed. From March onwards, the failure rate saw a general improvement, hitting an annual low of 0.07 per cent in August and again in November.
The UK's business community finished 2010 stronger than it started the year. The average financial strength score[2] of UK businesses fell from 81.16 in January to reach its lowest point of 80.70 in May, but since recovered to reach a full year high of 81.35 in December.
Max Firth, MD of Experian PH, said: "2010 has been a period of relative stability for business insolvencies and the improving trend in the insolvency rate has been positive. This contrasts significantly to the last major recession of the early 1990s when the rate escalated over a long period and peaked even as the country came out of recession.
But what now for insolvencies? Was this just a 'blip'!
1.04 per cent of UK businesses failed in 2010, compared to 1.25 per cent in 2009, the first annual drop for two years. The total number of insolvencies decreased from 24,209 in 2009 to 19,946 in 2010 - an 18 per cent drop.
March 2010 saw the greatest number of insolvencies for the year when 0.11 per cent of the total business population failed. From March onwards, the failure rate saw a general improvement, hitting an annual low of 0.07 per cent in August and again in November.
The UK's business community finished 2010 stronger than it started the year. The average financial strength score[2] of UK businesses fell from 81.16 in January to reach its lowest point of 80.70 in May, but since recovered to reach a full year high of 81.35 in December.
Max Firth, MD of Experian PH, said: "2010 has been a period of relative stability for business insolvencies and the improving trend in the insolvency rate has been positive. This contrasts significantly to the last major recession of the early 1990s when the rate escalated over a long period and peaked even as the country came out of recession.
But what now for insolvencies? Was this just a 'blip'!
Tuesday 25 January 2011
Number of builders going bust falls by 23% since recession peak
The number of insolvencies in the construction industry has fallen by 13% over the last year to 1,470 in the last three months (Q3 2010) down from 1,685 a year ago (Q3 2009),says Wilkins Kennedy, the Top 22 accountancy firm.
Insolvencies in the construction industry have fallen by 23% from their peak of 1,913 during the recession in Q1 2009.
According to Wilkins Kennedy, economic growth has finally halted the rot in the construction sector. However, Wilkins Kennedy says that in part, construction sector insolvencies are down because so many of the weaker construction companies have already been driven to the wall over the last three years.
Wilkins Kennedy also points out that companies that still have outstanding bank loans that are coming up for renewal may struggle to roll those debts over with their banks.
Says Anthony Cork: “Banks are still recovering from the damage they suffered during the recession. They had their fingers badly burnt and are still reluctant to lend to the construction industry. Those banks are going to demand higher interest margins, higher arrangement fees and tougher covenants. It is going to hurt.”
Insolvencies in the construction industry have fallen by 23% from their peak of 1,913 during the recession in Q1 2009.
According to Wilkins Kennedy, economic growth has finally halted the rot in the construction sector. However, Wilkins Kennedy says that in part, construction sector insolvencies are down because so many of the weaker construction companies have already been driven to the wall over the last three years.
Wilkins Kennedy also points out that companies that still have outstanding bank loans that are coming up for renewal may struggle to roll those debts over with their banks.
Says Anthony Cork: “Banks are still recovering from the damage they suffered during the recession. They had their fingers badly burnt and are still reluctant to lend to the construction industry. Those banks are going to demand higher interest margins, higher arrangement fees and tougher covenants. It is going to hurt.”
Monday 24 January 2011
Almost 148,000 UK companies are facing ‘significant’ or ‘critical’ financial problems
In todays Red Flag report from Begbies Traynor almost 148,000 UK companies are facing ‘significant’ or ‘critical’ financial problems whilst those with ‘critical’ problems alone are struggling with nearly £53 billion worth of liabilities.
The report, which monitors the early warning signs of company distress, shows a 4% increase to 147,836 companies which experienced ‘significant’ or ‘critical’ financial distress in Q4 2010, compared to 141,527 companies in Q4 2009, representing the first year on year increase for seven quarters. The 147,836 companies also represented a 20% increase from 123,361 in Q3 2010, which was considerably more pronounced than the usual seasonal increase as seen this time last year (the number of companies increased by 6% from Q3 2009 to Q4 2009).
Whilst these figures are heavily weighted to the less severe category of companies facing ‘significant’ problems (representing 144,818 companies in Q4 2010), the data shows a marked increase in actions taken by trade creditors against their debtors.
The 3,018 companies experiencing ‘critical’ financial problems alone owe a total of £52.7 billion to creditors, suppliers and service providers, which compares to £57.5 billion owed by 2,943 companies in Q3 2010. The decrease in the average size of liabilities, from Q3 to Q4, indicates that a higher proportion of SMEs are suffering increases in financial distress.
Dark clouds indeed are gathering.
Friday 14 January 2011
HMRC Business Payment Support scheme and keeping proper records
In 2008, HMRC launched its Business Payment Support scheme, which has recently been extended for the duration of the present Parliament. Popularly known as ‘Time to Pay’, the scheme allows struggling businesses to defer tax payments.
However, recently business owners have expressed concerns that HMRC is taking a harder line despite the fact that they are willing – but unable – to pay.
Geoffrey Rogers, of Geoffrey Rogers Chartered Accountants and Tax Consultants in Plymouth, believes small firms – charged with creating jobs and driving economic growth - want to comply with their tax requirements but are not being given enough support to do so.
He said: “With banks still not lending, late payment on the up and other factors hitting cash flow, many small businesses are still facing an incredibly tough financial climate and signs that HMRC is set to pull the rug from under them are worrying.
“It’s typical that HMRC is going to fine small businesses for not keeping ‘proper records’ when it does not offer any real definition of what this means. Without clarification, and certainly without better education, in many cases, fining small businesses for poor record keeping would be like punishing a child with learning difficulties for poor reading. “Once again we are looking at the big stick being favoured instead of the carrot, which is, I’m afraid, typical of HMRC’s current approach.
However, recently business owners have expressed concerns that HMRC is taking a harder line despite the fact that they are willing – but unable – to pay.
Geoffrey Rogers, of Geoffrey Rogers Chartered Accountants and Tax Consultants in Plymouth, believes small firms – charged with creating jobs and driving economic growth - want to comply with their tax requirements but are not being given enough support to do so.
He said: “With banks still not lending, late payment on the up and other factors hitting cash flow, many small businesses are still facing an incredibly tough financial climate and signs that HMRC is set to pull the rug from under them are worrying.
“It’s typical that HMRC is going to fine small businesses for not keeping ‘proper records’ when it does not offer any real definition of what this means. Without clarification, and certainly without better education, in many cases, fining small businesses for poor record keeping would be like punishing a child with learning difficulties for poor reading. “Once again we are looking at the big stick being favoured instead of the carrot, which is, I’m afraid, typical of HMRC’s current approach.
Tuesday 4 January 2011
2011 will see continued record levels of personal insolvency
Personal insolvency specialists, RSM Tenon predict that annual personal insolvencies over 2010 are likely to exceed the record level set last year of 134,132.
With the upcoming increases in VAT and the inevitable rise in interest rates combined with the public sector cuts, RSM Tenon is predicting continuing record levels of personal insolvencies throughout 2011. Mark Sands, Head of Bankruptcy & Personal Insolvency at RSM Tenon, said: “As we come to the end of 2010 we are recognising that there have been record levels of personal insolvency again this year. Around 135,000 people have used personal insolvency as a last hope for dealing with their financial troubles, which is still approximately 25% higher than pre-credit crunch levels. We expect that this figure will increase to around 140,000 over 2011 with the rate set to continue until the 2012 Olympics.
With the upcoming increases in VAT and the inevitable rise in interest rates combined with the public sector cuts, RSM Tenon is predicting continuing record levels of personal insolvencies throughout 2011. Mark Sands, Head of Bankruptcy & Personal Insolvency at RSM Tenon, said: “As we come to the end of 2010 we are recognising that there have been record levels of personal insolvency again this year. Around 135,000 people have used personal insolvency as a last hope for dealing with their financial troubles, which is still approximately 25% higher than pre-credit crunch levels. We expect that this figure will increase to around 140,000 over 2011 with the rate set to continue until the 2012 Olympics.
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