Debt soars in the UK for listed companies

21st August 2019.

According to the latest Link Group UK plc Debt Monitor, debt soars for UK listed companies (UK Plc).

UK plc borrowing rose for the eighth consecutive year in 2018/19, according to the research.

Net debt (total borrowings less cash), jumped 5.8% to a new record of £443.2bn, despite the fact that the offseting cash balances had risen.

Net debt has now risen by almost 70% since the low point of 2010/11, when UK companies were still cutting debt on their balance sheets in reaction to the disruption caused by the financial crisis and subsequent recession.

The £24.2bn increase in the last year comes at a time when UK plc profitability is under pressure.

UK companies have seen operating profits remain flat year-on-year after two years of strong growth.

From credit crunch to credit binge

After years of historically low interest rates, the debts of the UK’s listed companies have risen to a new record. By the end of the 2017/18 financial year net debt had soared to £390.7bn.

Most of this increase has been in the last three years, helping fund dividends of £263bn at a time of low profitability for UK listed companies.

While reliance on short-term borrowing has reduced – The ratio of all UK plc debts has gone from 26% in 2008/9, more than a quarter (26%)  to just 18% –  long term debt has soared.

The amount of cash that companies hold has also soared.

Sector Analysis

For credit managers, it will be interesting where those debts are building.

The oil sector has seen the fastest growth in net debt, up 459% since 2008/9. In 2017/18, BP and Royal Dutch Shell accounted for an astonishing £1 in every £7 of all UK plc’s net debts. As the oil price collapsed in 2015, both undertook major restructuring exercises, and took on additional debt to fund their acquisitions and changes as well help maintain their dividend payouts while profits fell.

The consumer goods sector is the UK’s largest overall borrower, with three-quarters of debt in this sector made up by tobacco giants Imperial Brands and British American Tobacco.

Consumer staples groups Unilever and Reckitt Benckiser also significantly contribute to the sector’s debts.

Only telecoms, and retail and consumer services sectors have lower debts compared to 2008/9. As retail has been forced to become more and more competitive, these companies have taken a far more  defensive stance.

Is UK plc over-geared?

The debt/equity ratio provides a useful measure of how highly geared a company is, or in other words, how large its debt burden is.

As the credit crunch hit, UK plc collectively had very high debt/equity ratio of 89%, with total debt almost equal in value to the amount of equity on corporate balance sheets.

Within three years UK plc collective gearing had reduced sharply to just 64%, but after 2011/12, when credit conditions began to improve, companies quickly allowed gearing to rise

Since then, shareholder equity has risen more quickly than debt, with the debt/equity ratio currently down to a more comfortable 73%.

Amazingly Smaller and mid-cap companies now have lower gearing than their larger counterparts.

Justin Cooper, CEO, Link Market Services said “The economic recovery since the credit crunch has been slow, but very long, and some commentators suggest the cycle may be drawing to a close. Total borrowing may continue to rise as it’s a vital part of the investment financing-mix, but gearing or the burden of debt is on the wane. Investors may prefer to see UK plc focus on reducing gearing further to provide itself more breathing space in the next global downturn.”

Do you sell on credit?

With pressures on the cash flow it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.

Those customers will look for the easiest option  to boost their cash-flow. Don’t let it be you.

You can’t just assume your customers can and will pay you eventually, no matter how big their name is.

It is essential to have credit management systems in place to monitor and check your customers credit worthiness.

It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.

About CPA

The Credit Protection Association can help!

Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.

At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.

We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.

Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.

If you supply on credit, help us help you identify the risks.

Why use a third party collector?

As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.

Over the years we have collected billions in overdue invoices for our customers.

Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.

The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections

Ready to speak to an advisor?

For help or advice on credit management, entirely without obligation.

Call us today

0330 053 9263

CPA is passionate about late payment

The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.

We are extremely passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.

If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.

As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.

Under little used legislation, you are entitled to compensation for those late payments.

Now you can boost your own cash-flow.

CPA can help unearth the those hidden treasures.

We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.

Yes, CPA can help you boost your business cash-flow.

Don’t let your bankers control you, contact CPA today.

The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections

Read our blog here on how to crack down on the late payment culture.

Read our blog here on how to give late payers the slap they need.

The “Why” of the late payment culture.

Paying late is “crack cocaine” to big business.

Late payment culture risks “spiraling out of control”

visit our late payment compensation page

See our full blog and FAQ on late payment compensation

Do you realise you could be sitting on a fortune?

Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.

If you sold B2B on credit then there may be a hidden source of capital you can call on.

If you fancy an bit of extra cash in your business, rather than jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.

Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.

We can help you uncover the pile of gold, you didn’t even know you were sitting on.

If you trade with other businesses and were often paid late then you could be entitled to significant compensation.

Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.

Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.

You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.

That compensation could provide the cash boost your business needed.

But don’t delay, that compensation evaporates if not claimed within six years of the late payment.

How can CPA help?

CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.

We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.

Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.

CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.

The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit.  You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.

We do the work, you receive the cash.

If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.

We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.

We are helping business owners  who are looking to boost the returns from their business before they retire. We are helping businesses who have lost major clients after years of loyal service to get properly compensated for systematic late payment. We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.

Those former clients who regularly paid you late can finally be made to pay.

Ready to speak to an advisor?

For help or advice on credit management, entirely without obligation.

Call us today

0330 053 9263

The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!

The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections

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