Bank-to-business lending is forecast to contract 3.8% (net) this year, from net growth of 3.7% in 2022, before returning to growth (of 0.9% net) in 2024 according to research by leading economic forecasting group EY Item Club.

The outlook for business lending is set to improve next year as the economy begins to recover. However, growth remains subdued, and only 0.9% net growth is forecast in 2024 as businesses, especially SMEs, continue to deal with the economic shocks of recent years.

While bank lending to businesses soared during the pandemic as companies utilised state-subsidised lending schemes this year it is forecast to fall into negative territory by almost 4% (-£18.8bn).   Borrowing demand is expected to weaken as firms – both large corporates and SMEs – face multiple pressures from higher costs of servicing debt, lower earnings and continued global supply chain disruption.

2024 should see growth in net lending resume as high inflation eases and the economy starts to recover.  However, it is likely to be sluggish with EY Item Club forecasting low growth of 0.9%, equating to net lending of £4bn, reflecting the damage to sentiment from the series of economic shocks in recent years.  Growth is forecast to then pick up to 3.1% (£15bn) in 2025.

EY also forecasts that write-off rates on company loans will reach 0.8% in 2023, before dipping to 0.6% in 2024 and 0.5% in 2025. This compares with 0.2% in 2021 and 0.3% in 2022.  However, the forecast rise for 2023 is still a long way short of rates of 1%-1.5% in the early 2010s, following the financial crisis.

Emma Reilly, director of construction credit specialists Top Service Ltd, said:

“As bank lending tightens we expect to see debtor payment days lengthen.  Those businesses extending trade credit should ensure that they are running a tight ship in relation to credit control”.

At Top Service we promote the use of great customer relationships to support our members’ business growth and help to improve cash flow.

For us, credit management starts right at the beginning of your customer relationship. There are a few simple steps you can take that will make big improvements:

1) Use a credit application form

This will help you to deliver a great service to your customer and will also help you to collect information that will help you if you need to carry out due diligence checks prior to deciding whether to extend credit facilities or collect money from a customer. You can also help to prevent delays in payment by understanding what your customers needs to be able to make payment.

2) Perform customer service checks

Once you have provided your goods or service to a new customer and raised the invoice – check in on them. How did they find the service you provided? Did they receive the invoice OK? Do they need to place any further orders? By carrying out these customer service checks you’re not only standing out from your competitor, you’re building great customer relationships, helping your business to grow and also going someway to get your invoice paid on time. Checking there are no queries, that the invoice has been received and that your customer has everything they need to make payment can only have a positive impact on your payment terms.

3) React to information received

Reacting to information will be key. You should be monitoring your customers so you’re aware of any changes. If you’re notified of a new CCJ, check how much is outstanding from your customer and in cases where you perhaps aren’t due to chase an invoice until the end of the month, put a phone call in now or at least start chasing a little earlier than usual.

4) Keep an eye on anomalies

is your customer later than usual making payment. Find out why, it could be as simple as an invoice has been mislaid. Or it could be something more serious that you need to act on.

Information and communication is the key to great credit control.

Our team can provide you with individual advice and support if you need it and we also have a credit control healthcheck available on our website that is free for members to use. We will review the check and provide bespoke advice to you and your business.

Contact us for more details.

A survey by the Association of Chartered Certified Accountants (ACCA) and the Corporate Finance Network reveals confidence among SMEs has fallen from 38% in the summer last year to 17% now.

The number of SMEs who have plans for growth has plummeted from 38% in the summer of last year to just 17%. The research brings to the forefront the underlying pessimism among SMEs as a third (33%) of businesses felt less confident in their ability to grow following the Chancellor’s statement back in November.

The survey also found that 78% believe the government should prioritise small and medium businesses when identifying business sectors to direct future support. With a further 12% noting that micro businesses mustn’t be overlooked.

The ongoing stress of significant economic strain is taking its toll on the mental health of SME owners with an alarming 63% reporting higher levels of stress and anxiety. This has almost doubled over a six month period (33% in June 2022).’

ACCA UK and The CFN warn that as economic uncertainty continues, more detailed and targeted support from the government is needed to help firms’ growth worries and their mental health.

Glenn Collins, Head of Technical and Strategic Engagement at ACCA UK said “If the government wants to achieve their ambitions for economic growth, then it needs to take action and put in place a robust plan to address business pessimism. With an uninspiring Autumn 2022 Statement and subsequent cutting back of measures such as the energy support bill, SMEs are struggling and mental health is plummeting as a result. Businesses are in dire need of clarity for 2023 as they remain at a loss, unable to efficiently plan and organise their finances. This must be addressed in the Spring Budget.”

Commenting on the construction sector, Emma Reilly, Credit Management Specialist & MD at Top Service Ltd said “Construction output is still relatively strong and the government is still providing some help to SME developers, however, confidence in terms of getting paid on time is waning amongst SME construction businesses with many worried about the potential cash-flow challenges that lie ahead”.

A round-up of last year’s official business insolvencies, across all sectors, by Emma Reilly, MD of specialist credit referencing and debt recovery agency, Top Service Ltd:

*  50 in every 10,000 active limited companies entered insolvent liquidation in 2022.  This was an increase from the 33 per 10,000 active companies that entered liquidation in 2021, and was higher than the 42 per 10,000 in 2019 (pre Covid).

*  The company liquidation rate in 2022 was the highest liquidation rate since 2015, but was lower than the recessionary peak of 95 per 10,000 in 2009.

*  The total number of company insolvencies registered in 2022 was 22,109, which was the highest number since 2009 and 57% higher than 2021.

*  The increase compared to 2021 was driven by the highest annual number of Creditors’ Voluntary Liquidations (CVLs) for many years.  CVLs occur when the directors of a company appoint a licenced insolvency practitioner to formally close down their insolvent company.  They usually do this as a result of pressure from creditors.

*  The annual number of Compulsory Liquidations was higher than the record low number in 2021 but remained below pre-pandemic levels.  Compulsory Liquidations occur when a creditor issues a Winding-up Petition to the courts and then the court makes an order to wind the company up.  Many of these petitions are issued by HMRC for unpaid taxes.

*  Administrations were higher than 2021 but lower than pre-pandemic levels.  A company can appoint a licenced insolvency practitioner to act as an Administrator if there is a chance that the company can be rescued as a ‘going concern’ or if there is likely to be a better return to creditors than in a liquidation.

*  Corporate Voluntary Arrangements were similar to 2021 but lower than pre-pandemic levels.  These arrangements are made with creditors to allow the company to continue to trade.  Creditors vote as to whether they are prepared to accept a lower settlement figure which is usually paid back over an agreed period of time.

Latest quarterly figures from the Insolvency Service have shown that the number of company insolvencies across all sectors in England & Wales increased by 30%, compared with the previous year.

After seasonal adjustment, the number of business insolvencies in Quarter 4 (Q4) 2022 was 7% higher than in Q3 2022 and 30% higher than in Q4 2021.

The increase appears to have been partly driven by the number of Creditors Voluntary Liquidations which accounted for 82% of all company insolvencies.  These occur when the directors of a company appoint a licenced insolvency practitioner to formally close down their insolvent company.  They usually do this as a result of pressure from creditors.  The number of court ordered Compulsory Liquidations also increased to the highest quarterly number since the start of Covid, partly as a result of an increase in winding-up petitions presented by HMRC and due to a high number of petitions from a single bank.

The figures between 1st October and 31st December 2022 show that there were 5,995 (seasonally adjusted) registered business insolvencies, comprising of 4,891 creditors’ voluntary liquidations, 720 compulsory liquidations, 359 administrations and 25 company voluntary arrangements.

Emma Reilly, Credit Management Specialist and MD of Top Service Ltd says of the construction sector,

“Output is still relatively strong as 2023 gets underway although many experts are forecasting that output will fall later in the year, particularly in house-building.  The nature of the construction industry means that one insolvent main contractor can bring down dozens of smaller sub-contractors and suppliers so the sector is vulnerable in that respect”.

National Insolvency figures published (17 January 2023) by the Government’s Insolvency Service have indicated that the number of registered company insolvencies in December 2022 was 1,964:

• 32% higher than in the same month in the previous year (1,489 in December 2021), and
• 76% higher than the number registered three years previously (pre-pandemic; 1,119 in December 2019).

There were 183 compulsory liquidations in December 2022, more than three and a half times as many as in December 2021 and 8% higher than in December 2019. Numbers of compulsory liquidations have increased from historical lows seen during the coronavirus (COVID-19) pandemic, partly as a result of an increase in winding-up petitions presented by HMRC.

In December 2022 there were 1,659 Creditors’ Voluntary Liquidations (CVLs), 22% higher than in December 2021 and more than twice as many as December 2019. Numbers of administrations and Company Voluntary Arrangements (CVAs) remained lower than before the pandemic but were higher than in December 2021.

What makes Top Service Different?

When mainstream agencies look at credit information they number crunch. They use the last set of accounts and any public record information to produce credit limits and scores. It’s a pretty good way to look at credit information but it can overlook information that a person notices, for instance: What has happened from the time the business filed its last set of accounts to the time the credit check is performed?

Top Service Insider Intelligence is construction-specific information that provides up to date, relevant, reliable information to enable more informed business decisions to be made when accepting an application for trade credit. 

As the only credit reference and debt recovery agency specific to the construction industry, we make it our mission to ensure our members receive the most up to date, credit information and company trading experiences. Our insider intelligence can make a real difference between company profit and painful write-offs. 

What you need to know about Top Service:

• Our bespoke collection strategies mean that no case is treated the same. Our access to credit information and exclusive trading experiences enables us to change strategy quickly when our incoming intelligence is received, providing excellent results.

• Fast, effective collections. We know that speed is of the essence, so all collections are given top priority.  We don’t just go through the motions, our experienced and highly skilled team members are adept at tricky negotiations, dispute resolution, tracing absconded debtors and thinking outside of the box to achieve tangible results.

• Fully compliant.  We have been trading for 30 years and we have always taken compliance very seriously.  We are authorised by the FCA and Top Service Ltd is a corporate member of the Credit Services Association (CSA).  All senior Top Service staff are members of the Chartered Institute of Credit Management and collections professionals are hand-picked and trained to the highest standards. 

• We have more than 30 years of experience in collecting commercial and contract debts.

Contact our helpdesk team today on 01527 518800 to discuss how Top Service can support and help you protect your business.

Small and medium housebuilders struggling to access traditional development finance can take advantage of government funding to get homes built across England.

Through the government’s Levelling Up Home Building Fund, Homes England provides development loans to small and medium housebuilders.  The Fund supports smaller house builders that struggle to access finance through traditional bank lenders, with loans starting from £250,000.

Eligible developers:

*  Must be a UK-registered corporate entity or limited liability partnership.

*  Must plan to build or refurbish five or more homes on a site in England.

*  Must have a controlling interest in the land.

*  Must be able to demonstrate that the project would stall, or progress much less quickly, without this finance.

Emma Reilly, MD at Top Service Ltd says:

“It’s encouraging to see the government continue to support the construction sector through its Homes England initiative.  Reading the case studies it appears that many of the small developments that have benefited from the scheme wouldn’t have been possible without the government’s help”.

More information about the scheme can be found here:

https://www.gov.uk/guidance/levelling-up-home-building-fund-development-finance

Around £12m people in the UK are required to file a Self Assessment with HMRC every year detailing their earnings.  The January 31^st deadline for Self Assessment returns is approaching fast and those who file late will face fines of at least £100.

The January 31^st deadline also applies to payments of tax for which late payers will be fined and charged interest.  The fine can be as much as 100% of the tax bill if HMRC feel that a tax payer has deliberately evaded payment.  HMRC collectors may personally visit those who default and, in the event of non payment, HMRC may start bankruptcy proceedings as a last resort if more than £5,000 is owed.

The Government’s Small Business Commissioner is advising sole traders and partnerships to chase any monies owed to them as a matter of urgency:

“You can’t pay your tax if your customers don’t pay you” says Liz Barclay, Small Business Commissioner.

Emma Reilly, MD of specialist construction collections agency Top Service Ltd says:

 “If you need to free up some cash it’s not too late to instruct us to recover your overdue accounts in time for the HMRC deadline.  Call us for a chat on 01527 51880 if you need any help”.

Anyone struggling to pay their Self Assessment tax bill on time can find help from HMRC here:

https://www.gov.uk/difficulties-paying-hmrc

National Insolvency figures published (14 December 2022) by the Government’s Insolvency Service have indicated that the number of registered company insolvencies in November 2022 was 2,029:

• 21% higher than in the same month in the previous year (1,676 in November 2021), and
• 35% higher than the number registered three years previously (pre-pandemic; 1,505 in November 2019).

There were 290 compulsory liquidations in November 2022, more than 5 times as many as in November 2021 and 7% higher than in November 2019. Numbers of compulsory liquidations have increased from historical lows seen during the coronavirus (COVID-19) pandemic, partly as a result of an increase in winding-up petitions presented by HMRC. In October and November the numbers of compulsory liquidations were higher than the pre-pandemic comparison months, due to 95 petitions from a single bank.

In November 2022 there were 1,595 Creditors’ Voluntary Liquidations (CVLs), 5% higher than in November 2021 and 50% higher than November 2019. Numbers of administrations and Company Voluntary Arrangements (CVAs) remained lower than before the pandemic.

What makes Top Service Different?

When mainstream agencies look at credit information they number crunch. They use the last set of accounts and any public record information to produce credit limits and scores. It’s a pretty good way to look at credit information but it can overlook information that a person notices, for instance: What has happened from the time the business filed its last set of accounts to the time the credit check is performed?

Top Service Insider Intelligence is construction-specific information that provides up to date, relevant, reliable information to enable more informed business decisions to be made when accepting an application for trade credit. 

As the only credit reference and debt recovery agency specific to the construction industry, we make it our mission to ensure our members receive the most up to date, credit information and company trading experiences. Our insider intelligence can make a real difference between company profit and painful write-offs. 

What you need to know about Top Service:

• Our bespoke collection strategies mean that no case is treated the same. Our access to credit information and exclusive trading experiences enables us to change strategy quickly when our incoming intelligence is received, providing excellent results.

• Fast, effective collections. We know that speed is of the essence, so all collections are given top priority.  We don’t just go through the motions, our experienced and highly skilled team members are adept at tricky negotiations, dispute resolution, tracing absconded debtors and thinking outside of the box to achieve tangible results.

• Fully compliant.  We have been trading for 30 years and we have always taken compliance very seriously.  We are authorised by the FCA and Top Service Ltd is a corporate member of the Credit Services Association (CSA).  All senior Top Service staff are members of the Chartered Institute of Credit Management and collections professionals are hand-picked and trained to the highest standards. 

• We have more than 30 years of experience in collecting commercial and contract debts.

Contact our helpdesk team today on 01527 518800 to discuss how Top Service can support and help you protect your business.

The complex nature of construction contracts means it is all too easy for construction businesses to pay you later than is agreed or even pay less than you are entitled to.

The problem is exacerbated in times of economic unpredictability, when cash retention becomes a greater priority for many businesses.

It means recovering debt and monies owed is an expensive process for businesses within the construction sector. Generally there will be a cost involved in retrieving your debt, as well as your time taken.

Is there anything you can do to help recoup some of these costs?

The good news, is yes, you can.

You are entitled to claim statutory interest on late payments for goods and services.

If you currently have any debts owed to you, Top Service offers a debt recovery service, exclusively for businesses within the construction sector. We can help you claim statutory interest from late payers.

What does a late payment mean on commercial debts?

As a construction business who is overdue payment, to know if you are entitled to claim statutory interest, you need to fully understand what a late payment means on a commercial debt, and therefore at which point you can claim statutory interest.

If you have offered credit terms and agreed a payment date, a late payment is when you have not been paid within the period set out in the credit terms and therefore by the agreed date.

In cases where credit terms have not been established and agreed, there is a default period of 30 days from either completion of the work or the day the customer receives the invoice, whichever happens first.

If, however, a contract clearly states that there are no credit terms, payment is due as soon as the goods or services are delivered. For instalment payments, interest runs from the day after an instalment is due.

What is statutory interest?

Simply put, statutory interest is your legal right to charge interest on late payments.

How to claim interest on a debt?

Emma Reilly, Managing Director of Top Service, explains,

“If you want to claim interest on a debt, we advise to put your intentions forward in a written notice.

You should send a letter to your customer, or debtor, informing them of:

• The work you carried out or supplied
• The interest that is owed to date, and the ongoing daily rate

It is important to realise you have the right to claim interest under the Late Payment of Commercial Debts (Interest) Act 1998.

Your letter will clarify to the recipient how much their late payment is costing their own business.”

How much interest can I claim on my debt?

Currently, the statutory interest rate is set at 8% above base rate.

If an alternative interest rate has been specified in a contract, you cannot claim statutory interest. Instead, you must claim contractual interest at the agreed rate.

To help you calculate how much interest you should be charging, Top Service has created a handy interest calculator for both statutory interest and contractual interest.

What is the statutory interest rate?

The statutory interest rate was introduced in three stages through the Late Payment of Commercial Debts (Interest) Act of 1998 and the Late Payment of Commercial Debts Regulations 2002 and 2013.

The first stage of the Act allowed small businesses to claim interest from large businesses and public sector entities. A small business is classed as such when it has 50 or fewer employees.

In November 2000, this legislation was extended to also allow small businesses to claim statutory interest from other small businesses. By November 2022, interest could be charged by all businesses including public sector organisations.

Further amendments were introduced in 2013 regarding compensation payments, time to pay and fixed penalty charges.

How can Top Service help with your debt?

Top Service provides a comprehensive debt recovery service for construction companies. We use our construction and financial expertise, as well as experienced negotiation skills, to act on your behalf in recovering bad debt.

We provide the following services:

Chasing letters and emails

Debt recovery

Pre-litigation

Retention collection

Post insolvency debt collection

Collections consultation service

Our debt recovery service is a valuable solution across all scenarios, including if you’d prefer to continue trading with your debtor, you believe there might be a dispute or there has been very little third party collection activity to date.

Emma Reilly, Managing Director of Top Service, comments,

“Our team here is highly trained at recovering debts for our customers, and have great experience within the construction sector.

For us, part of the debt recovery process is educating our customers to improve their financial processes going forward, which is debt prevention.

Our Insider Intelligence membership is a great resource for debt prevention, which helps our 3000 plus Members with a competitive advantage within the construction sector. In particular, the trading experiences is what really sets us apart from other credit reference agencies.

Trading experiences are where members share their experiences within the community as to who are they working for, and whether they are being paid on time, late, or not at all.

The best part is, membership to our Insider Intelligence only costs £49 + VAT per month and there are no fixed contracts involved. And often, the statutory interest we help our customers to recover is more than the £49 membership, meaning they effectively pay their membership fee from the money we help them to recover. It’s a win win!”

Read a case study showing how our Trading Experiences saved Top Services’ Members hundreds of thousands of pounds in potentially bad debt.

If you’d like more information about the Top Service debt recovery service exclusively for the construction sector, please call 01527 518800 to speak to a member of our expert team.