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'!
Wednesday, 26 January 2011
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.
Wednesday, 22 December 2010
Bibby Financial Services comments on banks failure to lend £30bn to UK small businesses
Commenting on a report released yesterday by the National Audit Office, which shows banks have failed to lend a target of £30 billion to small businesses in the UK, Edward Rimmer, UK chief executive at Bibby Financial Services, says:
“The fact that there is a £30 billion discrepancy between the amount of money lent to small business in the UK and the original target set by the Government is disappointing. This situation is made worse by the determination of the banks to provide £7 billion in bonuses to senior staff over the next few weeks, despite their reluctance to lend. This may rub extra salt in the wounds of UK firms, many of which continue to struggle in the current economic climate.
“We know from our own research* that, despite the UK officially being out of recession, almost a quarter of businesses (22 per cent) feel that trading conditions are tough and they are only just surviving. This proves that there is a clear necessity for businesses to be financially supported and by depriving them of £30 billion of rightful funding, the banks have not played their part in boosting both business confidence and performance.
“We all know that access to finance is intrinsic to the survival and growth of our country’s small businesses, which are the engine room of our economy, and the Government set the business lending target for a reason to ensure this would happen. With this in mind, it is not acceptable that financial support has been withheld when it is clearly needed. For example, we have seen a 10 per cent increase in the number of firms using our invoice finance facilities in 2010. Businesses are not only recognising and trusting invoice finance as a more flexible and accessible form of funding, compared to bank overdrafts and loans, but also a more reliable one.
“Looking ahead to next year, it is vital that the Government and Vince Cable take robust action to ensure banks increase lending to UK businesses and allow them to achieve their potential to drive economic revival in this country.”
* Bibby Financial Services Business Factors Index, October 2010
“The fact that there is a £30 billion discrepancy between the amount of money lent to small business in the UK and the original target set by the Government is disappointing. This situation is made worse by the determination of the banks to provide £7 billion in bonuses to senior staff over the next few weeks, despite their reluctance to lend. This may rub extra salt in the wounds of UK firms, many of which continue to struggle in the current economic climate.
“We know from our own research* that, despite the UK officially being out of recession, almost a quarter of businesses (22 per cent) feel that trading conditions are tough and they are only just surviving. This proves that there is a clear necessity for businesses to be financially supported and by depriving them of £30 billion of rightful funding, the banks have not played their part in boosting both business confidence and performance.
“We all know that access to finance is intrinsic to the survival and growth of our country’s small businesses, which are the engine room of our economy, and the Government set the business lending target for a reason to ensure this would happen. With this in mind, it is not acceptable that financial support has been withheld when it is clearly needed. For example, we have seen a 10 per cent increase in the number of firms using our invoice finance facilities in 2010. Businesses are not only recognising and trusting invoice finance as a more flexible and accessible form of funding, compared to bank overdrafts and loans, but also a more reliable one.
“Looking ahead to next year, it is vital that the Government and Vince Cable take robust action to ensure banks increase lending to UK businesses and allow them to achieve their potential to drive economic revival in this country.”
* Bibby Financial Services Business Factors Index, October 2010
Thursday, 16 December 2010
Philip King raises the standing of credit management
Institute of Credit Management (ICM) Chief Executive, Philip King, is to join the working group of the Small Business Economic Forum (SBEF), a Government initiative championed by the Minister for Business and Enterprise, Mark Prisk, MP.
The SBEF’s working group comprises select representatives from the small business, accounting, banking and credit communities. Its main aim is to ensure that small businesses can take concrete benefits to support growth from the Forum’s discussions. The first working group will meet this month.
Philip King was personally invited to join the working group by Mark Prisk, MP, following the Forum’s inaugural meeting in October 2010. At the working group meetings, Government officials, along with attendees, will set the agenda for the next Forum meeting to focus on the most pertinent issues faced by SMEs in the UK.The invitation further highlights the importance the Government sees in the credit management for aiding small business growth and economic recovery.
As Philip says: “The working group will lead new small business initiatives, and by being part of the group we have the opportunity to ensure that credit management has a key role.“It is significant to see the Government engaging with business leaders and industry figures in this manner; as a group we need to ensure it has a positive impact on small businesses.”
The SBEF’s working group comprises select representatives from the small business, accounting, banking and credit communities. Its main aim is to ensure that small businesses can take concrete benefits to support growth from the Forum’s discussions. The first working group will meet this month.
Philip King was personally invited to join the working group by Mark Prisk, MP, following the Forum’s inaugural meeting in October 2010. At the working group meetings, Government officials, along with attendees, will set the agenda for the next Forum meeting to focus on the most pertinent issues faced by SMEs in the UK.The invitation further highlights the importance the Government sees in the credit management for aiding small business growth and economic recovery.
As Philip says: “The working group will lead new small business initiatives, and by being part of the group we have the opportunity to ensure that credit management has a key role.“It is significant to see the Government engaging with business leaders and industry figures in this manner; as a group we need to ensure it has a positive impact on small businesses.”
Subscribe to:
Posts (Atom)