Care home operator in Yorkshire collapses

A care home operator in Yorkshire (which runs 6 care homes) has suffered cash flow difficulties and has recently gone into administration after 9 years of trading.

This has thrown into doubt the future of 80 pensioners as well as having the potential to make 80 members of staff unemployed. Five of the workforce have already been made redundant.

This company will not be the last; many nursing homes are going bust or are coming under threat, particularly as banks look to reduce exposure to the sector.

However, there is no need to panic as investors are still active within the sector. Beer & Young are here to help and presently have one group already working through investment terms

The number of SME’s seeking loans has decreased

In the final quarter of last year 17% of all those who applied for overdrafts were rejected and 33% of those applying for loans got turned down. The number of smaller enterprises looking for finance has dropped, with most of them being classified as “happy non seekers”.  The figure of “happy non seekers” has risen from 68% last year to 78% this year.

It appears that the general public are so convinced that the banks won’t lend money that they have given up even trying to find out. However if your business is in trouble and does require investor funding, Beer & Young can help.

UK economy- worse than we thought

It has been reported that travel companies have a record low cash reserve. Due to a 49% increase between the third quarters in 2010 to 2011 in companies facing critical distress, it is inevitable that there will be further insolvencies in the near future. This rise of the levels of critical distress also stretches to other sectors, including the construction sector which has seen an increase of 41%, 63% in the property sector and 92% in the support services sector.

The British Retail Consortium have released data showing a decline in online spending in the third quarter of last year compared with 2010. Growth in online spending has slowed by 10%, a direct result of bargain hunting.

If your business is struggling financially and needs a cash injection contact Beer & Young. They have an unrivalled network of active private investors looking for the opportunity to help.

Royal Bank of Scotland increase the staff in their recovery department

The Royal Bank of Scotland has had its fourth consecutive pre-tax loss since being bailed out by the tax payer in 2008. The loss for the year comes to a total of £2 billion, an increase of £900 million on last year.

Within the last year loan defaults on all sectors within the group’s core business has increased by
£1.4 billion. Loans and advances classified as core were down year on year (excluding 3 sectors). Net loans made have decreased in the last year by £18.5 billion.

There has been a year on year increase of 800 staff in their Integration and Restructuring division. December of 2010 saw 300 team employees whereas in December 2011 the number was up to 1100.

Senior associate of Beer & Young comments: The fact that RBS have had to increase their recovery staff so significantly shows how many more clients must be at risk. If your company is struggling from financial difficulties please give Beer & Young a call today

Turnaround Investment Funding

The ongoing economic uncertainty is not aiding in inspiring investor confidence in most areas. The industry figures reaffirm this by showing a decline in turnaround private equity investments between 2007 and 2011. It would therefore be fair to say that companies in the current climate would assume that turnaround investing is not something that private equity is interested in.

However, over the past 2 years things are changing. Banks have accumulated large portfolios of assets resulting in them seeking funding partners to help them exit positions in assets. Funding has also taken a more alternative path, with the individuals investing directly into the business, rather than following regulated fund structures.

Although many companies have closed between 2010 and present day, Beer & Young are still a thriving business. With the UK’s unrivalled number of active turnaround investors, where better to turn if your business is in trouble? Beer & Young are testament to the fact that there is still a market for turnaround funding.

SME Growth Encouraged by Chancellor

The Chancellor has made plans to help with funding issues and stimulate growth in the SME community. They will be given the opportunity to focus on running their businesses, rather than facing the hurdles of the red tape surrounding issues like planning laws, employment laws and health and safety, which will all be relaxed.

The pressure will also be reduced, as plans to put in place auto-enrolment pensions have been postponed as well as extending the business rates holiday by 6 months.

The opportunity for SME’s to attract cash investments to assist with their growth has increased, due to the relaxation of the rules governing the main Enterprise Investment Scheme.

Our initial reaction to this is that it sounds all very interesting and positive but the proof as ever is in the delivery rather than the sound bites. Beer & Young have a 14 year track record of delivering what business owners really need, which is new money.

Beer & Young came to the rescue at the 11th hour

Nick Young, managing director of Beer & Young is featured in an article in the ICAEW magazine (Institute of Chartered Accountants) this month.

The article was centred on the world of turnaround and funding. Its lead feature was a case study where Beer & Young successfully raised 2.5million.

The company had exhausted its funds and the bank was unable to provide the funding it required. At this point Beer and Young stepped up, introducing 7 qualified investors, from which 2 firm offers were materialised and one was accepted.

This saved the jobs of all the employees and prevented the company from having to close its doors 2 months later as predicted would have been the case without the help of Beer & Young.

Keep your business in existence… contact Beer and Young today!

Downing Street Business Angels

The Managing Director or Beer & Young went to visit David Cameron at 10 Downing Street for a breakfast meeting about business angels.

The breakfast event was held by Lord Young of Graffham (Enterprise Advisor to the Prime Minister), with the Prime Minister himself opening the event with a ten minute speech.

The aim of the event was to promote awareness, share stories and views and find out what else could be done to encourage the UK Business Angels market.

Business angels play a vital role in offering financially struggling companies investment as well as their expertise and experience.  The government have recognised the importance and potential of the industry and are giving it their full support.

Beer & Young are leaders within the industry, currently hosting the largest number of active Business Angels and private investors. Call Beer & Young today if your business is in trouble and see how they can help you.

UK Business Distress

The UK economy appears to face increased business distress in the near future, especially companies in the South West which are very likely to face another tough year.

When it comes to critical distress, the South East has had a year on year increase of 33% and London has had a rise of 19%. These regions are starting to face severe financial issues; however, up until recently they have seemed recession proof. This could indicate the progression to a deeper stage of the recessionary cycle in the UK. Particularly in the automotive, construction, general retailing, professional services, property sectors and travel and tourism the distress levels have gone from significant to critical levels.

Due to the Olympics being held in London this year, it is believed that there will be serious consequences to the travel industry in particular, with at least one household name failing. As well as the tourism sector, with West End’s theatres already reporting a 95% decrease in sales for the duration of the Olympics.

Don’t let this be the end of your company, contact Beer & Young today to see how they can help.  Beer & Young have many associates in the South East and South West regions who can arrange an informal chat with you either on the telephone or in person.

Failure of Project Merlin

Beer & Young senior associate Michael Morley Smith comments that he is not surprised that Project Merlin appears to have failed. Despite the agreement to boost lending, the number of small businesses using a loan or bank overdraft has fallen over the last two years. The top 5 banks, including Royal Bank of Scotland, Barclays, HSBC, Lloyds and Santander missed their agreed targets for last year. 

Overall lending however is still above target, showing that money is going to large businesses, rather than small and new businesses that require it. The Merlin banks decreased small business lending by 6% (falling short of the SME lending target of £1 million) although promising to grow it, leaving jobs and growth hanging in the balance.

Michael further comments “we operate the largest and most active network of investors in the UK. I talk with investors almost every day, they are serious about helping small businesses and have capital to invest”.

Business Confidence in Negative Territory for 2012 First Quarter

Over a thousand businesses were monitored to put together a survey which shows that business confidence at the start of 2012 is in negative territory. The Business Confidence Monitor (BCM) is an indicator for growth and can make predictions regarding the recession and pick up on early warning signs.

Two declining quarters of gross domestic product declining could be the indication that the UK economy is currently be in the midst of recession.

In London, the Confidence Index has dropped 33.8 points since quarter 1 2011.

The findings from the Business Confidence Monitor this quarter would suggest that after the record fall in the last quarter business confidence hasn’t declined further, however businesses do remain cautious about the UK’s economic outlook. Businesses are bracing themselves for a long road to recovery as financial performance indicators are increasing at a very slow rate.

If your company is in financial crisis it doesn’t have to be the end, contact Beer and Young today for a free no obligation chat and find out what they can do to help.

Madhouse Possible Administration

It is always interesting to see what is going on in the market place. This story from last week has caught our eye.

Everyone seems to have heard of Madhouse. The Budget fashion chain has put 700 jobs at risk upon entering administration. They declared a net loss over the 12 month period ending January 2011 of over £195,000. It was reported that the company directors paid themselves £16,000 more in the last accounting year before the chain collapsed.

The lead administrator for the company has also handled the cases of Poundline, Retail Scotia and UK travel Shop in the last few months and is a known name in the retail space. Maybe if they had have approached Beer and Young they could have raised the money they required to save the business.

Company insolvencies have increased and experts predict this to continue

Company insolvencies have gone up by 7.4% in quarter 4 of 2011, compared to the same period in 2010.

Compulsory liquidations increased by 14.1% between quarter 3 and quarter 4 of 2011, however, increased at a rate of 16.1% compared to the same period in 2010. Company Voluntary Liquidation (CVL’s) have risen by 3.4% based on the same period in 2010.

Other corporate insolvencies have registered a 5.3% increase between 2010 and 2011’s levels, including receivership's, administrations and Company Voluntary Arrangements (CVA’s).

The figures show that in 2011, on average, one in 138 companies were liquidated.

Do not let things reach the stage where your company would have no other option, give companies like Beer & Young a ring today to discuss private investment.

Struggling Business Owners Considering Returning to The Work-Place

A report published this week reveals that one in four small business owners are planning to get out of business and back into employment as trading conditions are very tough, whereas others are scaling down their enterprise and seeking part-time work to supplement their income. The report also reveals that one third of small business owners have lost their drive and enthusiasm.

According to the report, a significant proportion of small and medium-sized business owners are thinking of returning to work with 50% saying that it is too difficult to be a business owner in the current economic climate.

A quarter (26%) of SME owners admit they no longer enjoy running their business, with a third (32%)  having stated that they no longer have the initial enthusiasm when starting teir venture. As a result, the report also reveals that one in four (25%) SME owners are considering returning to the workforce as an employee.

A contributing factor may be the reduction in the money they have been able to take out of the business for personal use. Half of those (50%) surveyed have reduced the money they withdraw, over the past 2 years, with restaurant owners suffering the most. Nearly three-quarters (73%) of businesses in the catering sector have experienced a marked decline in the amount they withdraw from their business - with almost a third (29%) reporting a drop of between 20-25% and 10% reporting a drop of up to 50%.

There appears to be very little improvement in sentiment in 2012. More than one in three (35%) believes there is an increasing risk of an economic "double dip" recession, a further increase compared with 28% when the same question was asked in June 2008.

However, at Beer and Young we have been very successful at raising capital for struggling businesses; see our website for case studies.

Beer & Young Director, Nick Young named as one of the “Power 100”

Sponsored by Insolvency Today, in partnership with Willis, the 2011 Power 100 list recognises

key people who are making the most demonstrable impact on and positive change within the insolvency profession.

With well over a decade of experience in a range of insolvency, recovery and turnaround work, Nick also accepted the “Business Rescue Funder of the Year” award for the second year running at the Insolvency & Rescue Awards held in October.

HMRC Leaps into Action

HMRC has been given substantial funding with the aim of raising an additional £7 billion each year – so unsurprisingly if has been very busy with a wide range of initiatives.

A new approach for HMRC is to use task forces for an intensive burst of activity targeting specific business sectors and locations where there is a high risk of tax evasion.  The first task force focused on the restaurant trade in London, with Scotland and the North West to follow.  The most recent task force tackles VAT abuse in London’s fast food outlets, with nine further task forces planned for 2011/12.  The latest software makes it very easy for HMRC to compare tax returns of different businesses, and to identify those that appear not to be doing so well.

HMRC is following up the Plumbers Tax Safe Plan with the VAT initiative, aimed at businesses that are trading above the VAT turnover threshold of £73,000, but are not VAT registered.  HMRC is writing to more than 40,000 businesses to make them aware of the initiative.  Businesses have until 30 September to notify HMRC of their intention to take part, and VAT registration is then required by 31 December.  A penalty of just 10% is likely to be charged on VAT that is paid late.

It has been estimated that last year HMRC investigated more than 9,000 inheritance tax valuations.  Many estates are only subject to tax because of the value of the deceased person’s home, and it is often a family member who takes on the task of administering the estate.  With a 40% tax rate, if can be tempting to value property below its true worth.  However, an undervaluation of, say, £25,000 will mean additional tax of £10,000 and a penalty of up to 100%.  It is therefore advisable to obtain several valuations and to have property professionally valued.

Finally, in an effort to collect tax as quickly as possible, HMRC has been sending letters to taxpayers  informing them that HMRC will be collecting and selling their goods in lieu of outstanding tax.  However, in many cases nothing is actually owed or payment plans have already been agreed.

Business confidence tumbles as economy trembles

Business confidence has plummeted by a record amount as fears persist the economy is set to contract in the final quarter this year.

The BCM Confidence Index collapsed from +8.1 in the third quarter to -9.7, according to the latest figures from ICAEW.

The index – a close indicator of GDP growth - is now at its lowest level since the nadir of the 2009 recession, fuelling concerns the economy will shrink by some 0.2% in the final quarter.

Growth for 2011 would therefore be 0.9% - a sharp drop on the 1.7% projected earlier this year.

The index revealed confidence across all business sectors has fallen, with just energy, water and mining remaining in positive territory at +2.3.

Weak property sector

The property sector is in the weakest position with confidence tumbling to -18.7, followed by banking, finance and insurance with -14.6.

Michael Izza, Chief Executive of ICAEW, said: "In the first nine months of the year, businesses have played their part in supporting economic growth.

"Many are proud of their success against a backdrop of a very slow and protracted recovery. Yet they are becoming increasingly worried about the immediate outlook and the risk of a double dip recession.

"They are looking to the Government which now needs to take urgent steps to restore business confidence and to show that it understands the need to rapidly change the mood that the business community clearly feels."

Turnover and profit growth expectations have now declined for two successive quarters, which has been compounded by a steep drop in capital investment growth expectations.

Headcount freeze

In total, more than three-fifths of UK companies are operating below capacity with the number of new employees expected to increase by just 0.9% as companies refrain from taking on new staff.

One ray of light was the BCM predicting – in line with the Bank of England – that the inflation rate will fall in 2012.

UK SMEs pessimistic about economy

Nearly three quarters of small businesses believe the UK economy will re-enter recession in 2012, according to new research from a credit reference agency.

In a sign that business confidence is still very low amongst UK small and medium-sized enterprises (SMEs), 73% of those polled by researchers anticipated that another recession was on the horizon, despite official figures revealing growth in the economy in the last three months.

Over 90% of small businesses also argued that the government should do more to encourage banks to lend to them, according to new research from credit reference agency, while only 8% of credit managers polled believe that the establishment of an SME bond market by the government would help businesses access funding. Over a third (38 per cent) predicted that such a fund will have no impact on firms seeking funds for growth.

Difficult Times for SME’s

Are these difficult times for SME’s – you bet they are! We are witnessing a significant increase in dialogue with business owners struggling with cashflow and needing to look at external support to relieve the pressure. Retailers particularly have been suffering, and it’s clear the flow of money has slowed over recent months across many business sectors.

The good news is that our investor network remains active and keen to look at providing capital quickly for the right business.

Typically we are introducing an average of four different investors to each client – an achievement in itself. That’s not to say that raising new capital is easy – far from it – however if business owners can make a compelling case of a brighter future, then we can normally offer a positive solution.

We are always happy to offer a professional view on what can be achieved, at no cost or commitment. Please call us if you know of a business in need; the earlier conversations take place, the better the chance of delivering capital to your client’s business.

FRAUD

It has come to our attention that Beer & Young’s good name and reputation is being used by fraudsters.  We take this matter extremely seriously and we’re doing everything we can to resolve this issue as quickly as possible.  Please note that Beer & Young Ltd and its Associates are in no way affiliated with Eilif Johnson Capital, EJC Capital, EJ-Capital or any other name in which these fraudsters are operating.

Business Rescue Funder of the Year 2011

We are delighted to announce that Beer & Young have won the ‘Business Rescue Funder of the Year’ award for the second year running.

The Insolvency & Rescue Awards is the biggest annual event in the turnaround industry. 550 people attended the gala, hosted at London’s Lancaster Hotel. Entertainment was provided by comedian Stephen K Amos who enlivened proceedings with a great set prior to the winners’ announcements.

Nick Young commented: “Winning the key Business Rescue Funder award two years on the bounce is great news and testament to the quality of the entire team at Beer & Young.  I am grateful for their efforts and look forward to continuing this excellent work through 2012.”

Insolvency & Rescue Awards This Week!

Finalists for the 4th Annual Insolvency & Rescue Awards were revealed back in August and finally the event has arrived!  This Wednesday, over 500 industry professionals will come together for a night of celebrations as once again turnaround specialists are recognised and rewarded for their excellence and contribution to the recovery sector throughout the year.

Beer & Young will be there defending their title as ‘Business Rescue Funder of the Year’ and also as finalists for the ‘Business Rescue of the Year – sub £20 million turnover’ category.

The event is being held at the prestigious London Lancaster Hotel.

An SME’s Guide to Private Investor Funding

As owners and senior managers of UK SMEs look ahead to the final quarter of the year and beyond, they face some serious challenges
.
With the latest figures showing that banks have once again failed to meet agreed targets for lending to small businesses, they can’t expect to receive much help from traditional sources.

Private investor funding offers hope for stressed small firms.

This free guide considers how SMEs can access the funding they need to survive and succeed in the future. Just click on the link below:

https://www.rapidrequest.co.uk/4/Default.aspx?95186.HWDSZIO8.1291960

Brits spend £9 billion every month paying off debt

Research from MoneySupermarket.com reveals one in four people are using over 40 per cent of their wages each month just to pay off non-mortgage debt.

This means a large proportion of the British public are eating into their available income on a regular basis, leaving less to fund rising bills and spiralling living costs.

The MoneySupermarket research showed the average amount of monthly debt per person is £322, a whopping 25 per cent of the average monthly income for a UK adult, which stands at £1,288.

The research also found eight per cent of people said they spent over 80 per cent of their wages repaying debt, highlighting how stretched the nation's finances are at the moment.

Men hold a greater proportion of personal debt (excluding mortgage) of £7,944 on average, when compared to women who owe over one thousand pounds less at £6,739, fifteen per cent less than their male counterparts.

Tim Moss, head of loans and debt at MoneySupermarket.com  said: 

"With the cost of living continuing to rise, consumers are feeling the squeeze on their wallets more than ever. It's therefore worrying to see such a high number of people needing to use so much of their income just to service existing debt.

"However, making the most of every pound really does count when it comes to the end of the month, and it's vital that those needing to repay debt are doing so using the best method.

"For someone with credit card debt, it is vital regular monthly payments are maintained, as a late or missing a payment could result in being charged fees or losing any promotional rates.

"Setting up a direct debit helps consumers avoid missing payments and forking out significantly more than expected in interest payments and fees."

The research found that Londoners have the highest amount of personal debt in the UK, owing £8,478 on average, compared to those in Yorks & Humber, who owe £5,796.

However, those in London only use 22 per cent of their wages on average in paying off this debt, while Yorks & Humber dip into 28 per cent of their wages to repay debt.

Tim Moss continued: 
"Consolidating debt payments can be a useful process for stretched consumers, either through a credit card or a personal loan, depending on their situation.

"Interest free balance transfer cards work well for those transferring borrowing smaller amounts, and are confident they can pay back the balance within the promotional period.

"Barclaycard for example offers 22 months interest free on balance transfers on its Platinum Credit Card - great for those looking for some financial flexibility and reduce their outgoings.

"Personal loans are also good alternative option as they offer a fixed monthly repayment amount over a fixed term. There are plenty of competitive options available at the moment, including Alliance & Leicester and Sainsbury's Finance personal loans, which have a current headline rate of 6.3 per cent for borrowing over £7,500, over a period of five years.

"However, the best credit card and loan deals are generally reserved for those customers with a good credit rating so it is worth checking your credit file before you apply.

"The golden rule for consumers is not to borrow money unless it is absolutely necessary. Anyone feeling the pinch needs to go through their finances making sure monthly outgoings are covered by what's coming in each month.

"For those seriously struggling to keep up with payments, I would advise seeking debt advice from one of the free debt advice charities who can help them get their finances back on track.

Toy company that owns the rights to children’s favourites Mr Men and Noddy to enter administration

The creditors of Chorion are preparing to place the company into administration just a week after the departures of its chairman, the Labour peer Lord Alli, and his deputy Viscount Astor.

It is understood that Chorion’s owner, the private equity firm 3i, has failed to find new funding for the company and is set to opt for administration because it stands to lose its £86 million investment into the business.

The company, which also owns the rights to the Agatha Christie series of crime novels, breached its covenants in March this year and has simultaneously failed to come to an agreement with creditors, which also include Lloyds Banking Group, on a refinancing package.

It was rumoured that 3i and Chorion were holding 11th hour talks with private equity houses in a bid to find fresh lines of capital, but a final deal could not be struck.

According to its most recent sect of accounts, for the year ending March 2010, Chorion has debts of around £70 million and annual interest payments of £35 million.

For the same period, the company’s earnings before interest, taxes, depreciation and amortisation of £14.9 million, while revenue reached £51.7 million.

Global economic turmoil damaging business confidence

The level of business confidence across the UK has fallen to its lowest level since the UK was still in recession, according to a national study published today.

The joint survey, by an accountancy firm and the Institute of Chartered Accountants in England and Wales (ICAEW), shows a widespread decline in confidence as global economic turmoil has impacted businesses’ future plans.

The UK Business Confidence Monitor (BCM) also shows that an increasing number of businesses see tax and red tape as major challenges, with 40% believing regulation is a greater burden than 12 months ago.

The monitor takes a measure of confidence among business owners and this index has fallen from to +8.1 in the third quarter of 2011, from +13.7 in the second quarter, and is now at its lowest level since the second half of 2009, when the UK was still in recession.

The confidence index has been on a downward trend since the first half of 2010.

Business owners who took part in the survey bemoaned the lack of progress to make it easier to do business in the UK.

Four in 10 firms, told the survey that regulatory requirements now pose a greater challenge than 12 months ago, up from 33% in the same quarter last year.

Despite the introduction of a one in, one out rule, for business regulation and a cut in corporation tax from 28% to 26% in April, many British firms still feel swamped under bureaucracy and red tape.

The BCM also brought to light that many firms are seeing turnover and profit growth weakening, forcing them to revise down future expectations.

This follows expectations that the Office for Budget Responsibility will revise down its own growth forecast of 1.7% for the current year in its forthcoming autumn statement

.

Overall, the survey showed that a positive trend in financial performance for many businesses has started to falter.

Average turnover growth for businesses who took part in the survey, for the 12 months to the third quarter of 2011, stands at 3.6%, while average gross profit growth is reported at 3.1%.

Insolvency News reveal the Shortlist for the Fourth Annual Insolvency & Rescue Awards

A record number of entries were submitted and the judges will soon be deciding the winners for the profession's most prestigious awards scheme.

The awards will be held at the Lancaster London hotel on October 5th, which will feature Edward Davey, the minister with responsibility for insolvency, as keynote speaker.

Beer & Young are once again finalists in two categories, they will be defending their title as ‘Business Rescue Funder of the Year – Broker / Equity’ and are also contenders for ‘Business Rescue of the Year - sub £20m turnover.’

HMRC to suppress time to pay statistics

HMRC has confirmed that July’s statistics on time to pay, which reveal that £1.02bn of taxpayers’ money remains outstanding under the scheme, will be the last to be published.

The most recent figures on time to pay, provided by HMRC’s business payment support service, show that £7.71bn in total has been deferred by businesses with cash flow problems, although £6.69bn has been repaid.

The figures show that a total of 444,000 time to pay agreements have been made since November 2008, although the number of deferrals have been in decline since late 2009.

Just over £1bn remains outstanding, of which around £650m is overdue, but the insolvency profession and the public will be left in the dark over these levels after HMRC decided not to publish them in future.

The revenue ran a six-week consultation on the figures earlier this year, but only had two responses, one internally and another from the Treasury. After it closed, HMRC decided that it will stop publishing the statistics after July.

No press release was issued as HMRC did not view it as “high profile” enough, and none of the RPBs or the trade body R3 was made aware of the consultation. 

R3 president Frances Coulson 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, and we are concerned to learn that HMRC will no longer publish the official statistics on this from July. We believe they are in the public interest.”

A spokesperson for the Insolvency Practitioners Association said: “It does seem that the IPA was not approached about this consultation. It is a little surprising that the HMRC representatives that spoke about time to pay at the IPA conference in April 2011 also did not mention it.”

A spokesperson for the Institute of Chartered Accountants in Scotland (ICAS) said: “ICAS was not aware of the consultation and we are in agreement that the stats would be useful for the industry.”

A spokesman for HMRC said: “Time to Pay should be a short term aid to businesses. Repeated requests may be a sign that the business is no longer viable. It is not fair if HMRC give preferential treatment to some businesses by giving them easier terms.

“Therefore, given that a repeat request is more likely to be refused it is entirely understandable that the number of refusals is increasing as a percentage of requests made.”

5,179 firms in critical condition

A total of 5,179 companies in the UK were facing critical problems in the second quarter of this year, representing liabilities of nearly £60bn, according to the latest Red Flag report.

The report, issued on 29^th July, shows a 12 per cent rise in the number of companies in a critical financial condition compared to the first three months of 2011.

Travel and tourism, hotels and accommodation and retail sectors continue to suffer with further decline. The number of companies suffering critical financial problems in the hotels and accommodation sector increased 47 per cent and for the travel and tourism industry, this figure spiked by 31 per cent. The retail sector also saw a 17 per cent increase.

But while these industries remain highly vulnerable, the report shows a 48 per cent fall, quarter on quarter, in the number of businesses facing ‘significant’ financial problems. This fall is an apparent glimmer of good news, but could be indicative of weaker businesses actively moving from significant to critical financial problems - and ultimately to insolvency, as well as seasonal factors which typically impact on the first quarter figures.

HM Revenue and Customs is taking a more robust stance. As the level of support from the revenue is gradually decreased, it is increasingly evident that businesses using the scheme are now struggling to cope with current trading conditions.  Many companies which made use of the time to pay scheme have failed to achieve a turnaround and are now seeking a second deferral agreement with HMRC. 

However, the government is finding it difficult to give second chances and the number of winding up petitions issued by HMRC in the second quarter of 2011 has more than doubled since the first quarter.

Property also showed no signs of improvement, according to the report. The level of companies in this sector showing signs of critical distress views was up by 42 per cent in the second quarter compared to the first.

There was also a 41 per cent rise in the haulage and logistics sector during the same period.

JULY 2011 NEWSLETTER

Welcome to our Summer Newsletter.

The first half of 2011 has been a challenging one for many involved in the SME community. Small businesses are struggling to generate good cashflow and finding it very hard to access new capital from their banks. We see many business owners who are behind with payments to HMRC, most recently corporation tax bills, and finding a less than sympathetic ear from the tax collectors.

Paradoxically, we have an ever increasing network of private investors who are seeking the right opportunities to invest capital. The vast majority of these individuals are self-made entrepreneurs who have exited their core business and have an appetite for backing established trading businesses who have a need for capital.

We’re finding ourselves able to generate significant investor interest for almost all of our clients; holding meetings between clients and investors often within days of being taken on. Over two thirds of our clients receive offers of funding, which is a testament to the quality of our investor network.

The tricky bit, of course, is managing expectations on both sides. Agreeing terms, valuations, keeping DD to an appropriate level, not allowing time to drift and maintaining deal momentum are all obstacles that need careful management.

We’re always keen to talk with business owners who have a need for capital and are comfortable with an equity funding solution. Please don’t hesitate to contact myself or a colleague at any time.

INDUSTRY AWARDS

It’s that time of year again, the cutoff date has now passed and entries have been submitted for this year’s Insolvency & Rescue Awards. 

Now into its fourth year, The Insolvency and Rescue Awards is the biggest event in the insolvency and turnaround industry, where professional excellence and outstanding achievements are recognised.

We are back this year to defend our title as ‘Business Rescue Funder of the Year’. We have also entered a second category to highlight our achievements since the last awards ceremony with our entry for ‘Business Rescue of the Year’.

Finalists are due to be announced in the coming weeks and the awards will be held on 5th October at the Lancaster London Hotel.

Let’s keep our fingers crossed!

BIRTHDAY CELEBRATION

Now into his seventh year with Beer & Young, Senior Associate Michael Morley-Smith celebrated his 65th Birthday this month. Trained as an accountant, Michael has intimate knowledge of small business practice as well as company insolvency rules, and has become one of our in-house technical experts for company turnaround.

Michael is a huge fan of Formula 1 and cricket – we’re looking forward to a day out at the Rose Bowl to see England/India in September.

Congratulations on reaching this milestone. We expect several more years’ effort before we hand over the brass clock!