The Analysis News & Opinions


Warning over business debt collections prospects


A growing number of small business owners and self-employed people are facing high levels of debt as they struggle to keep their firms afloat, according to new research. Findings show that half (49%) of the people


contacting Business Debtline last year had debt totaling £10,000 or more, with nearly a quarter (23%) owing more than £30,000. With self-employment now standing at


15% of total employment and small firms helping to drive the economy, the report, Taking care of business, highlighted 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 challenges that can lead to financial difficulty and, in some cases, business failure. Business and personal debts are common


amongst the people helped via Business Debtline, with the two often intermixed, further complicating their situation. While the people helped had a wide


income range, 39% 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. Nearly half (45%) of callers surveyed said


they experienced problems with late payments, where they were 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. 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


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people helped 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. A significant proportion (69%) of clients


surveyed considered themselves to be in a vulnerable situation. Financial difficulty was the main cause given, with depression, anxiety, and stress commonly cited. For many, a vulnerable situation caused them to struggle to trade, further impacting their income. Joanna Elson , chief executive of the Money


Advice Trust, said: “Self-employment and small business ownership continues to grow


and play a crucial role in driving forward our economy. While many of these firms are able to flourish, a growing number are struggling with high levels of debt. “Many of the people 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 firms receive the help they need.”


Event set to drive council collections


Intrum UK and its joint-venture partner Hammersmith & Fulham Council have launched a London event to drive change in local authority collections practices. Rushanara Ali, MP and member of the


Treasury Select Committee, will address senior local authority figures at the Local Authority Ethical Collections conference in London on 7 February. In July, the Treasury Select Committee


published its report on household finances, calling for reform to ‘uncompromising’ local government collections. The event, which is free to relevant


personnel from councils, will hear from leading experts in the charity sector, financial regulation, and local government. Attendees will also be able to see


demonstrations of cutting-edge collections technology that transforms the approach


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they can take. Eddie Nott, managing director for Intrum UK, said: “Local authorities face the difficult task of reforming collection practices while ensuring maximum returns to fund essential services. “Fortunately, cutting the use of bailiffs


does not have to mean a reduction in revenues.” He added: “Ethical collections offer a


smart approach, not a soft option. Learning from best practice in the highly-regulated private sector means councils can raise their collections and ensure residents have a positive experience. Building relationships and negotiating sustainable payment plans reduces the risk to vulnerable residents and protects vital public services from further cuts.” l For further details on attending the event, please e-mail events@hfcollections.co.uk


December 2018


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