Tough quarter for business debts

The number of debt decrees registered against Scottish businesses rose by more than a third during the third quarter of 2018, according to figures released today by Registry Trust.

There were 754 decrees issued against all businesses in Scotland during Q3 2018, 34 percent more than during the same period the previous year.

A 44 percent rise in the number of decrees issued against companies accounted for most of this increase. In contrast the number of decrees registered against unincorporated businesses, which are generally smaller, increased by just two percent.

The total value of all business decrees rose by 21 percent to £2,874,044 over the year. Within this, the total value of company decrees, rose 17 percent to £2,116,734 and the average company decree’s value fell by 19 percent to £3,398, the lowest corporate average for a third quarter, despite rising in number. The total value of non-corporate decrees increased 31 percent to £757,310 with the average at £5,781, a 29 percent increase on Q3 2017.

Registry Trust is the non-profit organisation which collects decree and judgment information from jurisdictions across the British Isles and Ireland. In Scotland it collects information on small claims, summary, ordinary cause and simple procedure sheriff’s court decrees. A decree is incontrovertible proof that debt has not been managed.

During Q3 2018, 5,668 debt decrees were registered against Scottish consumers, six percent more than in the third quarter of 2017.

A further one percent increase on last year’s historic Q3 high in the average value of small claims and summary cause decrees set a new record, whereas a 22 percent drop in average value of ordinary cause decrees, to £13,102 gave the lowest Q3 figure on record. This combination caused the total value of all consumer decrees to remain approximately flat at £15,100,752.

Only 3.38 percent of decrees were marked as satisfied during Q3, far lower than the 15.75 percent of satisfied debt judgments in England and Wales, where satisfaction rates are generally higher owing to legal differences.

Trust chairman Malcolm Hurlston CBE said: “Both consumers and businesses need to be more alert to having decrees marked satisfied when they have been paid. It gives an immediate boost to credit records and several thousand are currently missing out.”

In Q3 2018 Registry Trust received 8373 requests to search the register for Scotland online at TrustOnline allows anyone to search for judgments and similar information registered against consumers and businesses in any jurisdiction across the British Isles and Ireland.

Mr Hurlston said: “People can check their own records through credit reference agencies but only TrustOnline gives access to judgment information about other people and businesses. The golden rule is: Check before you transact.”

Business statistics

● Q3 2018 Decrees against all businesses (compared with Q3 2017)
○ Total: 754 (up 34 percent)
○ Total value: £2.9m (up 21 percent)
○ Average value: £3812 (down ten percent)
○ Median: £1434 (down three percent)
● Q3 2018 Decrees against incorporated businesses
○ Total: 623 (up 44 percent)
○ Total value: £2.1m (up 17 percent)
○ Average value: £3,398 (down 19 percent)
○ Median: £1332 (down six percent)
● Q3 2018 Decrees against unincorporated businesses
○ Total: 131 (up two percent)
○ Total value: £757,310 (up 31 percent)
○ Average value: £5,781 (up 29 percent)
○ Median: £1,826 (up 35 percent)

Consumer statistics

● Q3 2018 All consumer decrees (compared with Q3 2017)
○ Total: 5668 (up six percent)
○ Total value: £15.1m (down 0.2 percent)
○ Average value: £2,664 (down six percent)
○ Median: £1,215 (down five percent)
● Q3 2018 Small claims and summary cause decrees
○ Total: 5124 (up five percent)
○ Total value: £7.9m (up six percent)
○ Average value: £1,556 (up one percent)
○ Median: £1,203 (up four percent)
● Q3 2018 Ordinary cause decrees
○ Total number: 544 (up 20 percent)
○ Total value: £7.1m (down seven percent)
○ Average value: £13,102 (down 22 percent)
○ Median: £7,741 (down eight percent)

The Chartered Institute of Credit Management (CICM) and ITN Productions present ‘Credit Experts’

Due to the success of ‘Credit Champions,’ The Chartered Institute of Credit Management (CICM) has partnered with ITN Productions to create flagship news-style programme ‘Credit Experts.’

SMEs are the lifeblood of the UK economy, contributing more than £2 billion annually with this number expected to grow almost 20 per cent by 2025. Presented by national newsreader Natasha Kaplinsky, ‘Credit Experts’ will explore the vital role credit management plays in keeping businesses in business, will showcase the latest innovative technologies and best practices facilitating effective customer outcomes and will highlight industry-leading knowledge and guidance that is vital for sustaining and growing a successful business landscape.

Drawing upon ITN’s 60-year heritage and expertise in storytelling, the news-style piece will combine key interviews and reports with sponsored editorial profiles from leading organisations and will premiere during British Credit Week in March 2019.

Philip King, Chief Executive, CICM said: “Now, more than ever, credit professionals are needed to help guide businesses, large and small, through uncharted waters and an uncertain future post-Brexit. Hearing from those professionals, learning about best-practice credit management, and exploring the increasing role of AI and other technologies in enhancing the customer journey will make this a compelling programme.”

Elizabeth Fisher-Robins, Head of Industry News, ITN Productions, said: “Building on the success of ‘Credit Champions,’ we are delighted to be partnering with The Chartered Institute of Credit Management to create ‘Credit Experts.’ We hope this programme continues to spotlight the importance of excellent credit management in supporting business success and the wider UK economy.”

Arcinova seeks to continue impressive phase of growth with help of SFS

Arcinova, a contract research and development organisation providing a range of services to the pharmaceutical industry, is benefitting from invoice finance from Siemens Finance Services (SFS). Arcinova’s services include drug product manufacture and analysis, testing and bioanalysis to understand a drug’s impact.

The company has enjoyed impressive growth since its inception in February 2016, with turnover and staff numbers growing year on year. Arcinova decided to use invoice finance to access extra funding for the business.

By using invoice finance, when a company such as Arcinova invoices its customer, up to 90% of the approved invoice total is immediately advanced by the finance provider. The remaining 10% is paid once its customer settles the balance. This provides the company with essential working capital so it can benefit from improved cash flow without having to wait for bills to be settled.

Paul Ryan, Finance Director at Arcinova explains: “As our growth accelerated we needed to free up money to invest in technology and staff. Invoice finance seemed like the most logical solution to achieve this.”

SFS was selected after a review of a number of invoice finance providers.

Paul explains: “We knew of Siemens by reputation and were aware they had experience in the healthcare sector. This helped them to understand our company and offering. We’re not selling products but services; SFS accounted for that and tailored the invoice discounting arrangement accordingly.

“We were delighted that a long-established financier like Siemens was keen to work with a new business like ours. They recognised that although the company is relatively young, we’re growing rapidly and have an impressive customer base.”

The invoice discounting facility has now been in place for several months and is running smoothly. Arcinova benefits from SFS’ intuitive invoice discounting system that offers real-time information to give an accurate view of the account and drawdown of funds within a matter of hours. Additionally, a dedicated account team is on hand to answer any queries swiftly and accurately.

Paul summarises: “It’s important we seize this opportunity for growth by investing appropriately. Invoice finance from SFS is helping our company go from strength to strength.”

Pulin Trivedi from SFS, who is the dedicated invoice finance account lead for Arcinova, adds: “Every business is different and it’s not sufficient to apply a ‘one size fits all’ approach to invoice finance. Arcinova, for example, operates in a hugely regulated industry, so we needed to familiarise ourselves with the audit trails required and adjust our processes accordingly.

“We’re excited to support Arcinova in the next stage of its growth journey.”

Reward Finance Group delivers a record number of deals in October

Reward Finance Group, the Leeds and Manchester-based alternative finance provider, has achieved another milestone by lending £7m across 23 deals in October, four more than the previous record set in March this year.

The deals, which included cash injections and invoice finance, were provided to a wide variety of businesses including manufacturers, property developers, leisure operators, and the hospitality sector.

Speaking about the achievement, Nick Smith, sales and marketing director of Reward Finance Group, said, “I am extremely proud of our teams in Leeds and Manchester as nobody in our market can boast such an achievement.

“To complete more than a deal a day can be attributed to a number of factors. The fact that banks are still reticent about lending means companies are looking for alternative types of funding. In addition they want a lender who can get to grips with their business needs quickly and provide them with fast and flexible finance.

“Despite reports of Brexit fears our latest achievement shows there is still a lot of activity across all sectors by ambitious companies who want to grow their businesses.”

One example is a revolving credit facility provided to Flylolo, a flight operator, which buys aircraft seats in bulk, by finding under-utilised aircraft in order to obtain the best prices. It then sells them to individuals and families at reduced rates on ‘peak season’ flights.

Speaking about the deal, managing director of Flylolo, Paul Dendle, said, “I have been impressed with the way the deal has been structured by using existing assets to leverage cash. The new credit facility has allowed us to take advantage of purchase opportunities which are crucial to our business.”

FSB: Decline in firms ‘spells trouble’

Official figures published today show that the number of Scottish businesses fell by 8,830 between March 2017 and March 2018 – with a large fall in unregistered enterprises and a smaller decline in registered firms.

Andrew McRae, the Federation of Small Businesses’ (FSB) Scotland policy chair, said: “A decline in the number of Scottish businesses spells trouble for our ambitions for our economy and our local communities.

“To tackle this problem, we need to see more people in Scotland choose to start-up in business and develop a business environment which helps local firms thrive.

“In the short term, we need to see a Brexit deal which works for smaller firms, not just key sectoral interests and a Scottish budget which puts enterprise at its heart. In the long term, we need a stronger start-up culture; as well as tax and regulatory systems which recognise the difference between multinationals and family firms.”

The statistics also show there are 343,535 small and medium sized firms operating in Scotland, providing an estimated 1.2 million jobs. These businesses account for 99.3 per cent of all private sector businesses in 2018 and more than half (54.9%) of private sector jobs. The new figures also show the number of Scottish employers rose by 915 since last year.

Andrew McRae said: “These figures also underline just how important smaller businesses to the fabric of Scotland. There are roughly three times as many Scots employed by these operators than work in the NHS and our local authorities combined. By giving smaller businesses the best chance to succeed, we can boost prospects for the country as a whole.”

Payment report: Half of British business invoices are overdue

Businesses in Britain have a higher proportion of overdue invoices compared to their counterparts across Western Europe, new research by trade credit insurer Atradius reveals.

The annual Atradius Payment Practices Barometer for Western Europe found almost half of all British business invoices (48.7%) were overdue. This compares to an average across the region of 41.8%, up from 40.7% in 2017. In addition, Great Britain faces the longest B2B payment delays with businesses receiving payments for their products and services an average of 34 days late – 10 days longer than the average among Western European businesses.

The report, which surveys companies across 13 Western European countries, also found nine out of 10 British businesses (89.6%) were experiencing frequent late payments, slightly higher than the Western European average (87.6%). British businesses are marginally more likely to experience payment delays when trading internationally; 91% reported frequent late payments from overseas customers compared to 88.2% from domestic customers.

Late payment from B2B customers is reflected in a longer DSO, which may adversely impact businesses’ liquidity, increasing B2B trade credit risk. Based on the Atradius research, over the past year Great Britain recorded the second biggest increase in DSO at 35 days, up from 31 days. The biggest increase in DSO was recorded in the Netherlands (46 days, up from 41 days). More than half of the firms surveyed across Western Europe said payment delays affected their business. Of these, 18% had to take specific measures to correct cash flow, 16.8% reported losing revenue and 15.9% subsequently postponed payments to their own suppliers.

The reason most cited for payment delays was an insufficient availability of funds, reported by 39.2% of British businesses. More than a quarter of businesses (28.8%) blamed delays on their customers using outstanding invoices as a form of financing. Interestingly, disputes also accounted for a significant number of late payments; 26.3% of businesses said delays were due to the goods or services provided not corresponding to what was agreed in the contract. Moreover, 22.6% cited a dispute over the quality of the goods or services provided as a contributing factor.

The Payment Practices Barometer also reported the proportion of B2B sales made on credit in Great Britain as having dropped by 6.7% year on year to 39% – although this remains slightly higher than the Western European average of 37.4%. A third of Western European businesses said they would refuse to grant credit terms to an overseas B2B customer if they lacked information on the customer’s business or payment performance.

Tom Danson, Head of Commercial for the Midlands Region at Atradius, said: “Today’s economic climate is characterised by change and uncertainty, and it is evident that this has taken its toll on businesses in all sectors. What lies ahead is becoming more difficult to predict which makes the risks of trading all the more acute. With an increase in late payments and Atradius economists predicting a 6% increase in UK insolvencies in 2018 and a further 3% in 2019, businesses need to have a risk management strategy which is robust and adequately safeguards their bottom line – or face the consequences. Protection of receivables is of paramount importance. Credit insurance enables businesses to manage the inevitable risks of selling on credit and importantly, also equips firms with access to accurate and up to date business intelligence to help them grasp growth opportunities through safe and profitable trade.”

Rising self-employment comes at a cost for tens of thousands in debt

A growing number of small business owners and self-employed people are facing high levels of debt as they struggle to keep their businesses afloat, according to new research from Business Debtline. Findings show that half (49%) of the people contacting the service last year had debt totaling £10,000 or more, with nearly a quarter (23%) owing more than £30,000.

Business Debtline, the UK’s only dedicated free debt advice service for people who are self-employed and other small business owners, helped more than 36,000 people in 2017, with demand for the service increasing.

With self-employment now standing at 15 percent of total UK employment and small businesses helping to drive the UK economy, the report – Taking care of business – highlights eight key challenges facing the people behind these businesses and the steps needed to support them.

Issues such as late payments, low and variable incomes and a lack of essential business management skills are identified as some of the key challenges that can lead to financial difficulty and in some cases business failure.

Both business and personal debts are common amongst the people helped via Business Debtline, with the two often intermixed, further complicating their situation.
The report uses insight from data collected via advisers at Business Debtline, surveys and an analysis conducted by Experian, which found that Business Debtline clients are overrepresented in households that tend to be younger, with lower household incomes, high uses of credit and limited resilience in terms of savings and pensions.

Low and irregular income
While the people helped by Business Debtline had a wide income range, 39 percent had gross business annual turnover below £25,000. Low and irregular income were major challenges and often prevented small business owners from saving, investing in the business and having the financial resilience to deal with changes in circumstances such as ill health. More than six in 10 callers surveyed (61%) said they had used personal credit at some point to pay for business costs in the past two years.

Late payments exacerbating debt problems
Nearly half (45%) of callers to Business Debtline surveyed said they experienced problems with late payments, where they are uncertain when the money they have earned will be paid. The issue was common for both sole traders and company directors. Whilst not necessarily the reason for going into debt, late payments often led to increased debt problems, and could make it harder to pay tax, business debts as well as household expenses including rent and energy bills.

Lack of essential business management skills
Business failure was highlighted as one of the main reasons for contacting Business Debtline. Many external factors can affect a businesses success, however many of the people helped by Business Debtline lack some essential skills and knowledge needed to run a business. Before starting trading, most felt confident completing a budget (80%) but they were less confident constructing a business plan (59%) and completing tax and VAT returns (47%). After seeking advice from Business Debtline, 82% of callers reported that they felt more in control of their finances, with 86% saying they were less likely to find themselves in a similar situation again.

Vulnerability an underlying factor
A significant proportion (69%) of Business Debtline clients surveyed considered themselves to be in a vulnerable situation. Financial difficulty was the main reason given, with depression, anxiety and stress commonly cited. For many, being in a vulnerable situation caused them to struggle to trade, further impacting their income.

In response to these challenges, the Money Advice Trust – the charity that runs Business Debtline – has set out a range of recommendations for government, regulators and creditors across sectors. These include calls for:
· the government’s new Single Financial Guidance Body to ensure that self-employed people are well served across its debt advice, money guidance and pension guidance functions
· more powers for the Small Business Commissioner, including the power to fine persistent late payers and an expanded remit to cover the public sector
· creditors to extend their work on supporting personal customers in vulnerable circumstances to their small business customers.

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs Business Debtline, said: “Self-employment and small business ownership continues to grow and play a crucial role in driving forward our economy. While many of these businesses are able to flourish, a growing number are struggling with high levels of debt, putting both their business and personal finances at risk.

“Many of the people behind these businesses are in need of advice and information at an earlier stage of their journey. There is support out there but the government needs to do more to proactively champion these opportunities to ensure that these businesses receive the help they need to succeed.

“For those already in difficulty there is some good news with the inclusion of sole traders in the government’s planned Breathing Space scheme. However, too many people with business debts are suffering in silence for too long before seeking advice.

“At Business Debtline, more than four in 10 of the people we help wait a year or longer before contacting us. It is crucial that any self-employed person or small business owner who is struggling to cope seeks advice as soon as possible.”

What More UK – Trading not halted by Brexit negotiations

With international sales higher than ever before, What More UK are not phased by Brexit negotiations. As the largest supplier and brand leader of plastic housewares in the UK they are leading the way with innovation and quality.

Tony Grimshaw, Director of What More UK said: “We inadvertently began making provision for Brexit, 5 years before the referendum. We looked at our export business and decided it had too much emphasis on Europe. We decided to spread our search for new retail partners into new areas such as the USA, South America, Canada, Eastern Europe and Africa. In all these areas we have had significant successes.”

What more UK send their products to 72 countries worldwide and are continuing to seek word wide retail opportunities. As a member of The Made in Britain Campaign, What More UK are proud to support and promote british manufacturing.

Tony continues: “Business is business and politics are politics. No matter which Brexit is decided, trade will continue, British products are recognised all over the world as quality. The right products of the right quality at the right price, backed up with the right service will always be accepted.
Whatever politians decide or don’t decide. It is a big world out there and our quality Wham products are ready, willing and able to fill the shelves of any retailer, no matter where in the world they are.”

Over the last two years What More UK have replaced all 52 of their injection moulding machines. Ensuring they have the most up-to-date equipment on offer from Germany and Italy. A huge investment is a sign of their confidence and ability for the future.

John Monk Trading Company, one of New Zealand’s largest importers of house ware and giftware have been working with What More UK for over 10 years and are confident the relationship will continue to flourish.

John Monk, owner of John Monk Trading company said: “We like the way What More UK conduct business, with their straight up attitude and flair for developing new innovative products. We have seen this company grow and develop into a worldwide recognised brand with quality product. Made in England is a very strong selling point for us in New Zealand and our major retailer Briscoes has grasped this, the What More UK range had grown to be a category winner. Through the years we have experienced turbulent times with currency fluctuations, raw material costs, more recently Brexit uncertainty and shipping costs , however What More sales have still been maintained.”

GeeTee’s are independent retailer’s, local to What More UK, with numerous stores in the NorthWest of England have been trading with What More UK for almost 20 years.

Jonathan Twist, Managing Director of GeeTee’s said: “What More UK have been our number one supplier of plastic housewares and now bakeware since we started trading with them in 1999. The Wham name and their various brands continue to be synonymous with high quality and top value, traits that we too are identified with and that our customers depend on.
Products made in Britain, not to mention in the North West of England, where we are based, are also highly attractive to us and our shoppers.
The What More team can be depended on to provide us with reliable, trustworthy and efficient service, making our business with them pleasurable and mutually rewarding.

We stock many dependable Wham lines, although our experienced buyers trust What More’s regular moves into new ranges. For example we are expanding our bakeware range this Autumn/Winter by stocking the award-winning Baker & Salt products.”

EBA stress test: Use AI to prepare against Brexit shock – SAS

Lee Thorpe, head of risk business solutions, SAS UK & Ireland said: “With Brexit just around the corner, it’s good to see that the banking sector has proved itself well capitalised for a severe but plausible stress scenario. Given the levels of uncertainty currently at play, forewarned is forearmed. But that’s just the problem – with the details of any potential deal (or no-deal) still unclear, how forewarned can banks actually be without testing hundreds of possible permutations?

“Following on from the test, financial institutions must continue to ensure that they map out as wide a range of scenarios as possible, to mitigate the potential consequences of Brexit. They need to constantly update crisis responses using analytically-crafted scenarios so they can react to any market restrictions that result in an economic downturn as quickly as customers and the nation reacts.

“Having to organise and invest for regulatory measures may not be a preferred business priority for financial institutions, but there is a significant upside to getting a better understanding of the market influence on capital especially during a crisis. The automation of processes to execute the analytical models means that many different scenarios can be put to the test to help support strategic decisions or ensure preventive measures against losses are implemented rapidly.

“We’ve come a long way since the 2008 crash. AI is now starting to be utilised in the banking world. With advanced analytics at its core, AI can now help risk teams map highly complex situations and approximate potential outcomes before humans make a final decision. Banks need to collaborate with AI to build the strongest possible understanding, informed by deep analytical insight.

“The biggest test is still to come in March – banks must go beyond the regulatory requirements and ensure they have the foresight to prepare for multiple worst case outcomes, even while hoping for the best.”

UK fails to improve its standing in the World Bank insolvency rankings – R3

The lack of improvement in the UK’s standing in the World Bank’s latest insolvency rankings underlines the need for UK corporate insolvency reform, says insolvency and restructuring trade body, R3.

For the second year running, the UK is at 14th place in the “Resolving Insolvency” table in the World Bank’s Doing Business report (published on 31 October). This follows a fall from 13th to 14th in 2016’s rankings.

As the UK stands still, many other countries have substantially improved their insolvency and restructuring frameworks, in order to attract more international restructuring deals. The Netherlands has recently made a number of reforms and has climbed from 11th in 2016 to 7th this year.

R3 believes that the UK government should take heed of the implicit warning in the latest rankings, and act quickly to implement many of the proposals for insolvency reform which were announced over the August Bank Holiday.

Stuart Frith, President of R3, commented:

“The UK cannot afford to stand still when it comes to strengthening our insolvency and restructuring framework. Although the UK framework is strong and internationally well-regarded, there are still opportunities to make our framework more responsive, and to make it easier to rescue jobs and businesses.

“With continuing uncertainty about how Brexit will end up affecting cross-border restructuring and insolvency cases, the UK has much to gain from acting swiftly to modernise the underlying framework, and maintaining its international competitiveness.

“It’s very promising that the Government has recently reiterated its commitment to corporate insolvency framework reform, but now what is needed is follow-through, to ensure that the insolvency and restructuring framework – a key ingredient in a successful economy, as the World Bank recognises – remains fit for purpose, and leads the international pack.”

When publishing its reform package in August, the Government said it would introduce the changes through legislation when ‘parliamentary time allows’ – but did not give a clear timetable for this.

Stuart Frith adds: “We look forward to working with the Government to progress these reforms, making sure that the views of the insolvency and restructuring profession are listened to and acted on. The reforms aren’t perfect and there are still tweaks to be made, but overall they could help improve our world-class framework.

“A rigorous and responsive insolvency and restructuring framework is key to the smooth functioning of any economy. The UK performs well on measures such as time taken to resolve cases and recovery rates, but the strength of our recovery framework performs less well than many other countries, according to the World Bank. Unless this can be improved upon, our whole economy will see the effects.”

Other countries which have improved their insolvency frameworks recently are rising in the rankings. The Nordic countries are performing well (Finland in 2nd, Norway up to 5th, Denmark to 6th, and Iceland to 12th), while Belgium has jumped up three places in the last year, from 11th to 8th, and Slovenia is up one place to 9th.