More than 150 estate agency firms went insolvent last year and as many as 7,000 are at risk as high street operators face the triple whammy of online competition, a sagging property market and cuts to letting fees.

 

For a little while now, the retail industry has found itself collapsing under the pressure from low profits and high business costs. Low consumer confidence and online competition have persistently attacked brick and mortar stores, leaving companies from all sectors vulnerable and grappling for a competitive edge.

Now it seems the spotlight has fallen on estate agent firms, with new research revealing how thousands of companies fell into insolvency last year. The new study, conducted by accountants Moore Stephens, found that 153 estate agency firms went insolvent in the year to May 2018, a small increase on the 148 the year before. This illustrates the hesitancy exercised by consumers concerning the purchase of”big-ticket” items, such as real estate and large investments. A grander effort will need to be made by the industry to shift this sentiment.

At the Credit Protection Association, our debt recovery services encourage our Members to invest in new opportunities and projects. We chase down unpaid invoices and recover residual debt, providing our Members with a greater financial stability. This has encouraged business owners to purchase new technology and equipment for their firm, once again gauging the interest of the consumer.

Last week, shares in Britain’s biggest estate agent, Countrywide Properties, plunged 25 per cent after it issued its fourth profit warning in eight months and called on shareholders to raise fresh funds to cut its debt.

Countrywide, the company behind Hamptons, Bairstow Eves, Taylors and Gascoigne-Pees, has been hit hard by a downturn in the housing market in London and the south-east, a botched revamp of the business and growing competition from new online firms such as Purplebricks.

Moore Stephens said government plans to ban letting fees charged to tenants may narrow the profit margins of some estate agents even more, as fees from tenants currently contribute significantly to the bottom line.

Chris Marsden, restructuring partner at Moore Stephens, said: “Insolvencies of high street estate agents are increasing as online competitors continue to chip away at their sales.

“With the ban on letting fees stated to come into force in 2019, estate agents will struggle to pass those fees on to landlords.”

“Some areas in the UK are appear to have an excess capacity of estate agents, which could mean there is not enough business to spread around as property transactions stagnate.”

The extra stamp duty surcharge of 3% of the value of a buy-to-let home introduced in April 2016 has also added to the woes of estate agents, with some buy-to-let investors choosing not to add to their portfolios.

The British landscape is not being easy on its businesses; from any sector. Common problems have manifested, with Brexit uncertainty and low consumer confidence creating the most trouble. Tough online competition is doing little to relieve brick and mortar’s plight, with both retail and housing sectors losing customers to popular online counterparts. However, as consumers are getting more tech-savvy, businesses owners should see this as an opportunity to follow suit.
At the Credit Protection Association, many of our Members have struggled to succeed in the current business climate. Late payment torment and tough business rates have left many vulnerable and with little cash to spend on expansion or investment. Some business owners have even found themselves at the brink of insolvency- we have swiftly dragged them back.
The collaboration between our debt recovery and credit management products have allowed us to free up cash flow as well as conduct credit checks, status reports and scrutinise intensely our Members financial background, as well as the background of all their customers and suppliers. Once late and bad payers are eradicated our Members can return to their sector stronger than before.

Here at CPA, we fight to the tooth for our members, particularly those who are balancing dangerously close to insolvency. We have now created a new department within our company dedicated to getting our members rightly compensated in accordance with the Late Payment of Commerical Debts (Interest) Act 1998. This has unlocked hidden cash and potential for our members and brightened their prospects and confidence within the current business landscape.

 

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