Liverpool came too close to collapse, says UEFA official

Irrespective of your personal football leanings, this is an interesting turnaround story…

One of UEFA’s most senior officials has warned MPs that Liverpool Football Club came within hours of going into administration. William Gaillard, an adviser at UEFA, the governing body of football for Europe, told a parliamentary inquiry into the governance of English football that Liverpool was an example of why financial fair play rules have to be brought into the game.

Gaillard, one of UEFA president Michel Platini’s closest advisers, warned a committee of MPs that Liverpool had come perilously close to going under after Tom Hicks and George Gillett loaded it with debt, before the club was taken over by American firm New England Sports Ventures (NESV) company.

Gaillard said: “We’ve seen more than 80 clubs in Europe in 10 years going into administration.

“Leveraged buy-outs for many clubs end in disaster. Just take Liverpool where you have owners who came, contracted debt, bought out the previous owners and saddled the club with the debt.”

Gaillard told the inquiry that what brought Liverpool down was “two failed banks, one British, one American,” which had been nationalised. He added: “They suddenly found themselves being owned by two failed banks that had been taken over by governments – Royal Bank of Scotland by the British government and Wachovia by the US government.

"The club has now been rescued and thank God because it has tremendous heritage - but it was a close call."

UEFA's new rules are designed to force clubs to break even after an initial period of flexibility. They tighten up the access to the Champions League for clubs burdened with huge debts.

Gaillard cautioned against sudden massive investment by unpredictable and untrustworthy parties.

"We at UEFA feel if a person brings equity, that is much better sit than if he brings debt," he said.

Bars and restaurants top table of 'distressed' businesses

There was a 15% increase in financial distress across all business sectors in the first quarter of this year, according to a large business recovery firm. The firm's Red Flag Report shows a 70% year-on-year rise in the number of businesses in the bar and restaurant sector showing signs of distress. Some 60% more businesses in the professional services sector were in a similar position. The firm commented that sectors relying on discretionary consumer spending were "beginning to show the effects of anticipated job losses."

Redflag report reveals: 186,000 firms in financial distress

Just over 186,000 UK companies are experiencing significant or critical financial problems compared with around 161,000 in the first quarter of 2010, according to an Insolvency Firm.

The insolvency firm’s latest Red Flag Alert, published today, claims that a total of 186,554 firms are in financial distress, a 15 per cent rise from 161,601 businesses year on year.

The report also reveals how specific sectors are suffering: year on year, the number of businesses showing signs of distress is up by 68 per cent in the bar and restaurant sector; by 60 per cent in the leisure and culture sector and by 23 per cent in the sports and recreation sector.

Other sectors also experienced worsening condition from the last three months of 2010 into the first quarter of 2011.

The Red Flag Alert reveals that 25,031 businesses in the construction sector were facing significant or critical financial problems in the first quarter, a 31 per cent rise on 19,167 construction companies in trouble during the fourth quarter of 2010.

There was an 87 per cent rise in the number of professional services firms in difficulty, to a total of 15,526 in the first quarter, from 8,293 in the last three months of 2010.

There was also a 92 per cent rise in the number of bars and restaurants in financial distress, to 4,505 from 2,347 businesses in the fourth quarter of 2010.

The Executive Chairman of the insolvency firm, said: “The figures for the first quarter of 2011 show the number of UK companies facing ‘critical’ problems has risen year on year with significant increases across the leisure sector in particular.”

He emphasised that the sectors which rely almost entirely on consumer discretionay spending were suffering the most.

He added: “Compared with our figures for food retail which show little change, it seems likely that a fall in consumer confidence and spending power driven by anticipated job losses lies at the core of the leisure sector’s troubles.”

The Executive Chairman explained that another marked increase was evident in the professional services sector where the number of firms showing signs of distress was up by 61 per cent compared with the first quarter of 2010.

He added: “Over 15,000 firms in the professional services sector are showing signs of significant or critical problems - partly driven by a stale property and corporate deals market - often the drivers for an active professional services community.

“Compared with the first quarter of 2010 figure, of 9,620, it seems that firms which operate with a high fixed cost base are finding the current market conditions increasingly difficult as their revenues fail to recover and the scope for further cost reductions becomes more limited.

“High levels of legal actions taken against debtors indicate that creditors are attempting to maximise cash collection right across their customer base.”

UK Consumer Prices Index - February

Some good news this week…

There is no doubt that businesses continued to struggle through the early months of 2011, but the fall in inflation for February can bring some relief to us all. UK Consumer Prices Index annual rate of inflation has fallen to 4%, down from 4.4% in February.  The fact that inflation has fallen may at least buy the Bank more time before it has to see if the economy can walk on its own without the support of record low rates.

Private Investor Delivers Much Needed New Capital

Many business owners come to us with a similar tale - a history of profits, but two years of recession has weakened the balance sheet, and they've suffered. 2011 brings a renewed opportunity for growth, but how do they fund this? Can't rely on banks...they have their own issues and are struggling to lend to SME's in today's climate.

Beer & Young specialise in raising capital urgently for businesses which have a need for capital. Our network of private investors is unmatched in the UK. Investment from private investors can be the answer: it enables the business to secure its immediate future and gives it the funds necessary to plan for growth and profits.

There are solutions to the funding problems facing many UK businesses - we are pleased to highlight another success in 2011. The names have been changed to protect the innocent.

Beer & Young were engaged to raise funds for our client, Product Promotions Ltd.

Established in 2000, Product Promotions achieved continuous growth until the late Noughties, at their high point achieving sales of £5 million whilst delivering excellent returns for the directors/shareholders.

The recession hit our client hard with many blue chip customers reducing their spend, the result of which put our client into a loss making position. Having traded through this period - under some duress - they were unable to fund the numerous new sales opportunities that had arisen as their customer base returned.

Beer & Young generated considerable interest from potential investors. We are delighted to report that after the usual period of due diligence, one investor has injected £400,000 of new money into the company.

This investment has given PP a much needed boost to the working capital position and balance sheet. Their bankers can relax somewhat with over £500,000 of debt still to be serviced. The danger of looming business failure has now gone.

We wish both client and investor well for the future.