Business Uncertainty? Insolvency Practitioners Can Help
Market Conditions are Difficult. Making the Right Decisions Now is Important.
Here at Poppleton & Appleby we keep a very close eye on the economy and business market. Amidst the uncertainty surrounding the Brexit endgame, it is clear that the UK is heading into a period of choppy water, certainly from a business perspective. As Insolvency Practitioners and Business Recovery Specialists a large part of our job is advising the professional advisors on how to help their clients that are facing financial difficulties – or even insolvency – make the right decisions to protect themselves during turbulent times and turn things around.
This article looks at some of the issues we are seeing in business at the moment, starting off with the printing industry, which is a often a good indicator of market conditions.
What is Happening in the Printing Industry?
Several of our sources in and around the printing industry are reporting:
- Reduced volumes
- Vicious pricing
- Margin squeeze and even negative margin
In light of these issues, it is not surprising that we are hearing of turnover down this year by as much as 24%, with little scope to cut costs any further. Two anecdotal stories confirm the worrying picture:
- One printing company owner, who will liquidate imminently, told us that he cannot get credit as he is on stop, and had to place a job out to fulfil an order. He said “I managed to get the job printed and delivered at a discount of 30% – still with a better margin than I could offer on the job myself – madness.”
- Another printer, who has seen turnover dip by 20% has looked at making 3 people redundant at a cost of c.£30k. But, as he said, this will only save him £60k p/a starting in 6 months time, and he needs the savings now.
Is this Turbulence Restricted to the Print Industry?
Despite the reasonably positive news that the UK’s rate of economic growth for the three months to the end of June 2017 was 0.3%, compared to 0.2% for the previous quarter, delving a little deeper reveals a patchy picture. This data is from the Office for National Statistics, who report that a stronger performance from the service sector offset weakness in the construction and manufacturing sector.
Overall, the feeling for business is that the underlying trend is uncertain. Once again, our feedback is that the areas where there may be problems on the horizon are:
- Retail
- Leisure
- Construction
- Suppliers to the Motor Industry
Looking in more detail at the construction industry, research by the accountancy firm Moore Stephens has shown that 26% of construction companies are showing signs of an increased risk of business failure. Once again, a Brexit related issue is considered a major cause, in this case the fall in Sterling pushing up the costs of imports, with smaller businesses being the hardest hit.
These same smaller companies are likely to be the ones who find it hardest to access lending and finance facilities, and this is when cash flow can start feeling the strain.
What About the Picture Regionally?
In our own area of Birmingham and the wider West Midlands, recent research by the Insolvency trade body, R3, showed that 26.1% of companies in July 2017 are at a higher than normal risk of insolvency. This compares to a figure of 23.6% in January 2017. Industry by industry the picture is patchy, with manufacturing, agriculture and construction faring the worst, whilst pubs, restaurants and tourism fared better.
As with the national picture, the key negative risk factors were Brexit uncertainty, along with concerns about the national living wage, and an increase in business rates.
How Can Our Insolvency Practitioners Help?
The best advice we can give to businesses and their professional advisors is don’t do nothing! Conditions for businesses are clearly difficult, and now is the time for business owners to make sure that everything is being monitored as closely as possible, so that all eventualities can be planned for.
This might be easier said than done, especially in the SME sector. However, the help and advice of a business turnaround specialist, who can advise on key issues such as cash flow problems, HMRC Debt, creditor pressure and sources of finance could be invaluable.
If you are a professional advisor with clients facing financial pressure, contact us, give our team of insolvency practitioners a call on 0121 200 2962 for an initial chat, or pop in and see us at our central Birmingham HQ. The sooner you get in touch, the more we can do to help.
