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Opinion


Corporate insolvency figures show mixed signs


The corporate insolvency statistics for 2016 have been skewed by a wave of personal- service companies being closed in the last quarter. It may have been just the closure of a handful of companies run by an umbrella provider which led to the spike. When you look beyond that, 2016 had more or less the same number of insolvencies as last year. Despite a number of challenges for firms in 2016 – the fall in the value of the pound since June’s EU referendum and the introduction of the National Living Wage among them – there is still a lot of downward pressure on corporate-insolvency numbers to balance these out.


Businesses are enjoying a significant safety net: compared to the pre-financial crisis economy, creditors – particularly banks – are much more patient with their borrowers, businesses are benefiting from record-low borrowing costs, and an increased focus, by the insolvency and restructuring profession, on early intervention has helped businesses avoid formal insolvency procedures. Businesses are in a position where they can sit on cash or take on new borrowing. Our regular surveys of business distress have found that key signs of distress are near their record lows, and that almost one-in-ten businesses are paying off only the interest on their debts.


The fall in the value of the Pound since the summer will undoubtedly have been a shock to some smaller businesses though – almost half our members have said Brexit has come up in discussion with struggling businesses since June.


After half a decade of falling insolvencies, insolvency levels are lower now than they were even before the financial crisis. However, the decline now seems to have stalled and we have had a very small increase instead – that is the first increase in insolvencies since 2011.


Andrew Tate President, R3


Offer is opened up to CCR’s readers


Credit professionals who read CCRMagazine are being offered two free months’ access to CreditHQ Standard. Users of this service will be able to access full Experian credit scores, to receive monitoring alerts on businesses that they are interested in, and to send solicitors letters to chase overdue invoices. Stephen Kiely, editor of CCRMagazine, said: “We always work to give our readers ever more value, so we are delighted to be launching this new arrangement. We all know how important it is to have the relevant information on the businesses that we work with, and it is also vital that our customers, in turn, are fully aware of the businesses that they are trading with. “Increasingly, credit professionals are taking on the role of offering credit- management advice to their, possibly less sophisticated, customers because, if they are


paid, then, in turn, they can pay you. We hope that this offer will go some way to making this work easier, by making the crucial information available in an easily understandable form.”  To take advantage of this offer, please go to ccr.credithq.co.uk.


Standard Financial Statement to go live


The Standard Financial Statement (SFS), from the Money Advice Service, was set for launch as CCRMagazine went to press. From 1 March, a transition period began, during which creditors and debt advice providers will move to using the new format. This will be the first time that all major debt advice providers, creditors, and other debt bodies will use the same format to assess income and expenditure for over-indebted people.


The SFS provides a single set of income- and-expenditure categories with spending guidelines to be used across the sector, in a single format; there is also a savings category. It was developed as a collaboration between creditors, trade bodies, advice agencies, and other interested parties.


Sheila Wheeler, director of UK debt advice at the Money Advice Service, said:


6 www.CCRMagazine.co.uk


“The launch of the SFS will be a major landmark in bringing consistency to the way organisations consider the budgets of over-indebted people. Consistency when assessing income and expenditure is critical and this single framework will have benefits for debt advisers, clients and creditors alike. “We call on all debt advice providers and creditor organisations, including government, local authorities, and utilities, to use the SFS.”


March 2017


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