The Insolvency Service have released statistics for April 2023. Overall there has been a 15% decrease in corporate insolvency (compared to April 2022). Compulsory liquidations rise, along with registered Administrations and CVA’s. CVL’s decrease, compared to April 2022.

Emma Reilly, CEO & credit management expert at Top Service Ltd commented “a comment made from a new member to Top Service has stuck with me recently. He said ‘just one avoidable bad debt is one too many’ and he is absolutely right.

Recently, whilst out and about talking to our members I’m finding there is a lot more awareness around assessing a potential customers credit worthiness when it comes to considering extending credit facilities. The awareness can flounder when it comes to keeping up to date with changes to the customers ability to pay, once credit facilities have been extended.

Keeping the due diligence up throughout the business relationship is vital to reduce the risk of being exposed to bad debt. There aren’t always standard warning signs when it comes to flagging a potential insolvency. There will nearly always be other creditors and intelligence that can be gathered from the industry that will forewarn you. That’s why industry specific credit information is so important”.

The Insolvency Service has today released it’s monthly report on company insolvency which shows a blanket rise across the board, compared to March 2022.

Of the 2,457 registered company insolvencies in March 2023:

• There were 2,011 CVLs, which is 9% higher than in March 2022;
• 288 were compulsory liquidations, which is more than twice the number in March 2022;
• 13 were CVAs, which is 44% higher than March 2022;
• There were 145 administrations, which is 12% higher than March 2022;
• There were no receivership appointments.

Included in the report is the following statement. The number of company insolvencies was 16% higher than the number in March 2022. The increase in company insolvencies compared to March 2022 was driven by an increase in the number of compulsory liquidations and CVLs. The increase in compulsory liquidations is partly as a result of an increase in winding-up petitions presented by HMRC.

Emma Reilly, MD at Top Service Ltd commented “Although temporary insolvency restrictions began to be phased out from October 2021, measures to protect small businesses brought in on 1st October 2021 through the Corporate Insolvency and Governance Act 2020 were still in place up to 31st March 2022. Namely the threshold for issuing a winding up petition was increased to £10,000 (temporarily replacing the threshold of £750.00) & the requirement of creditors to provide 21 days notice before proceeding with a winding up petition.”

Emma continued “There is definitely an increased awareness within the construction industry relating to the risks of being exposed to bad debt. We have seen an increased number of enquiries from construction businesses asking for support with credit information and debt recovery services”.

Government efforts to reform Companies House won’t achieve their aims without closing risky loopholes, insolvency and restructuring trade body R3 has warned.

The Economic Crime and Corporate Transparency Bill aims to address the misuse of UK company registrations and removals by reforming the powers of Companies House.

Nicky Fisher, Vice President of R3 said “The Bill won’t improve transparency over corporate entities and tackle economic crime while companies are dissolved and struck off the Companies House register with no investigation into the conduct of their directors. At the moment, anyone who is looking to avoid investigation can do this by waiting till their company is struck off the Register, as the option of restoring it via the courts to enable an investigation to happen is often too time consuming and expensive for the business’s creditors”.

Emma Reilly, MD of credit management specialists, Top Service Ltd, said “There is no doubt that some directors are taking advantage of the company dissolution process. We see it in the construction sector where a company has traded but then the directors fail to file a Confirmation Statement or accounts and the company gets struck-off and dissolved. When we know that a company is under threat of dissolution we will alert creditors so that they can oppose the striking-off. It would be better if there was a deterrent to abusing the dissolution process in the first place though”.

Recent statistics from the Government-backed British Business Bank (BBB) reveal that challenger & specialist banks have now overtaken traditional banks when it comes to small business lending.  In a survey carried out in the last quarter of 2022, 55% of the small businesses questioned had accessed finance from a challenger or specialist bank as opposed to a high street bank.

Emma Reilly, MD of specialist credit agency Top Service Ltd, said: “32% of construction businesses plan to grow in 2023 and it’s important that they are able to access the finance in order to achieve their growth plans”.

More details are available here: https://www.british-business-bank.co.uk/press-release/challenger-and-specialist-bank-lending-reached-record-high-of-35-5bn-in-2022-finds-latest-british-business-bank-research/

Have you heard of the British Business Bank (BBB)?  It was set up by the UK Government to help improve access to finance for smaller businesses.  The bank doesn’t lend directly but has relationships with 130 lenders, leasing companies and venture capital funds.

The BBB is currently administering the ‘Recovery Loan Scheme’ which helps UK businesses with a turnover of up to £45m to access finance using a 70% loan guarantee from the Government.  Even those businesses that were in receipt of the original Coronavirus Business Interruption Loan Scheme (CBILS) are eligible.

Emma Reilly, MD at specialist credit agency Top Service Ltd commented:  “A British Business Bank survey revealed that 32% of construction businesses were planning to grow in 2023 so access to finance is imperative to underpin that growth”.

More details are available here: https://www.british-business-bank.co.uk/ourpartners/recovery-loan-scheme/

New data from Mazars, the international tax firm, shows that HMRC tried to shut down 440 limited companies in the last quarter of 2022 over unpaid tax debts, a 46% increase from the 301 that it tried to close the previous quarter.

Michael Pallott, Partner at Mazars, says that the number of winding-up petitions can be expected to rise as HMRC increasingly abandons pandemic-era forbearance and returns to more normal levels of debt enforcement activity.  HMRC had been prevented from issuing winding-up petitions by the Government’s moratorium on winding-up petitions enacted during the pandemic.  This moratorium was lifted in March 2022, allowing HMRC and other creditors to pursue businesses that owe them money.  HMRC is feeling the pressure after it was recently criticised by the Commons public accounts committee for failing to collect an estimated £42 billion in unpaid tax.

Pallott said: “HMRC understandably needs to recoup money that the taxpayer is owed, however, given the negative economic outlook, the increase in winding up petitions from HMRC is likely to see more businesses forced to close their doors.”

Pallott adds that HMRC is willing to negotiate with businesses who have a genuine reason for being behind with their payments and wish to negotiate in good faith but early communication is vital.  Under certain circumstances, businesses can apply to the tax authority for Time to Pay arrangements, giving them an extended period in which to pay back their debts.  HMRC currently has 823,000 Time to Pay arrangements in place.

Emma Reilly, MD of specialist credit management company, Top Service Ltd, commented on the impact on UK construction businesses “We are seeing an increase in winding-up petitions being presented to construction companies, not just by HMRC, but by trade creditors too.  We would advise businesses with cash-flow difficulties to keep the lines of communication open with creditors to try and prevent a situation escalating to the winding-up petition stage”.

National Insolvency figures published (14 February 2023) by the Government’s Insolvency Service have indicated that the number of registered company insolvencies in January 2023 was 1,671:

• 7% higher than in the same month in the previous year (1,567 in January 2022), and
• 11% higher than the number registered three years previously (pre-pandemic; 1,502 in January 2020).

There were 189 compulsory liquidations in January 2023, which is 52% more than in January 2022, but 36% lower than in January 2020. 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 January 2023 there were 1,382 Creditors’ Voluntary Liquidations (CVLs), 2% higher than in January 2022 and 37% higher than January 2020. Numbers of administrations and Company Voluntary Arrangements (CVAs) remained lower than before the pandemic but were higher than in January 2022.

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.

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.