Mothercare set for administration and other business news on 5th November.
5th November 2019.
James Salmon, Operations Director.
We look at the next step for high street stalwart Mothercare, Clinton cards look set for a CVA and landlords reactions to high street CVAs.
Meanwhile KPMG report on some good news for retailers but not for manufacturers. Then we have the expectation for interest rates, the latest GDP forecast, which towns pay the most tax, the financial advantage of electric cars, a living wage boost and the findings of a trial into four day weeks.
Finally, on the political front we look at the latest on Brexits affect on confidence, the new speaker and parliament closing for the election.
Mothercare’s UK business to go into administration
Mothercare says it plans to call in administrators from PwC to its UK business, putting 2,500 jobs at risk.
The retailer expects its 79 UK stores and online business to be wound down by administrators, saying it has become clear UK retail operations “are not capable of returning to a level of structural profitability and returns that are sustainable”.
Thus far it has not been successful in attracting a buyer to save the business. Did they ask Mike Ashley?
The baby goods retailer said administration is a “necessary step in the restructuring and refinancing of the group”. The children’s retailer has already used a CVA (an insolvency process called a Company Voluntary Arrangement which enables a company to reach an agreement with creditors to pay off all or part of its debts) , closing 55 UK stores in the past year.
Zelf Hussain, PwC partner and one of the administrators, said: “It’s with real regret that we have to implement a phased closure of all UK stores.” He added that Mothercare “has been hit hard by increasing cost pressures and changes in consumer spending.”
Restructuring experts from KPMG were brought in last week to try and save the retailer.
Analysts say Mothercare has failed to adapt to an online retail model and its brand identity is hard to place. Richard Lim from Retail Economics said “As competition has become fiercer they have been beaten on price, convenience and the overall customer experience”.
Julie Palmer of Begbies Traynor said Mothercare had become “a byword for trouble on the High Street”, demonstrating “the failure of well-established brands to stay afloat”. Considering the climate for retailers in light of Mothercare’s struggles, the Times cites KPMG analysis showing 44 retailers entered administration in the six months to the end of September.
The firm operates in over 40 overseas territories, which are not under the scope of its administration plans. In the financial year to March 2019 its international arm generated profits of £28.3 million, whereas the UK operations lost £36.3 million.
CVA on the cards for Clintons
Greetings card and gifts chain Clintons is to hold meetings with landlords to discuss a possible CVA, with KPMG lined up to work on the proposals.
Landlords lose patience with CVAs
Sam Chambers in a piece I have just seen in this weekends Sunday Times says landlords are increasingly challenging CVAs which allow retailers to shut stores and cut rents, suggesting this could see “the recent flood could slow to a trickle”.
Will Wright, a partner in KPMG’s restructuring practice, argues that while a CVA is “not a great outcome for landlords, it has to be better than the alternative, which is an administration, where the impact on creditors is much more severe.”
“Now, CVAs are being challenged almost routinely, which makes them harder to implement and may result in more administrations,” he adds. Mr Chambers argues that if landlords are successful in driving reform of CVAs, “it would not ease the gloom on the high street,” adding: “They would be winning the battle, but still losing the war.”
The cases of Mothercare and Clinton Cards aptly demonstrate the difference. Mothercare will be closing their stores leaving landlords high and dry. Clinton Cards will belooking to keep their stores (or at least a majority) but reduce their rent burden.
Sales boost for retailers
Data from the British Retail Consortium and KPMG shows that retailers saw their best sales performance since April in October, with total sales up 0.6% on October 2018 and up 0.1% on a like-for-like basis.
However, growth was down on the 1.3% recorded in October 2018.
KPMG’s Paul Martin commented: “The jury is still out on whether this progress will benefit the retailers’ bottom line.”
Helen Dickinson, chief executive of the BRC, said that economic uncertainty means that retailers “will be looking nervously” at the run-up to Christmas. Meanwhile, Barclaycard reports a 1.5% rise in consumer spending last month, with an almost 7% rise in fast food and takeaway sales.
Picture ‘remains bleak’ for manufacturing
Stockpiling ahead of the aborted Halloween Brexit deadline briefly gave manufacturing a bit of a boost in October, “but the underlying picture remains bleak” says Samuel Tombs, chief UK economist for Pantheon Macroeconomics.
He adds that the volume of new orders indicated by the survey “points to the resumption of sharp falls in production ahead.”
Manufacturing activity fell slightly last month from September, according to a closely watched survey.
The sector scored 49.6 last month, on the IHS Markit/CIPS purchasing managers’ index where anything below 50 is considered a contraction, putting it above September’s reading of 48.3.
Rob Dobson, of IHS Markit, said: “With a further Brexit extension confirmed and the prospect of a December general election, it looks as if the spectre of uncertainty will cast its shadow over manufacturing for the remainder of 2019.”
Stephen Cooper, head of industrial manufacturing at KPMG, commented: “Brexit continues to weigh down on confidence in the sector, as does the global economic backdrop – but perhaps the result of the upcoming general election will help alleviate some of this.”
BoE expected to hold rates
The Bank of England’s (BoE) Monetary Policy Committee is expected to hold interest rates at 0.75% this week, with policymakers unlikely to make a change before the general election.
Uncertainty over who will be in charge of the BoE is also believed to be a factor in any decision to hold rates, with the committee waiting to hear who will succeed BoE governor Mark Carney, who is due to leave on January 31.
Howard Archer, chief economist at EY, said it would be “very unusual” for the BoE to act on rates so close to an election, saying he expects policymakers to “remain in wait-and-see mode.” He also notes the fact a new governor is set to be named, saying that while they will only represent a single vote on rates “they will want to be involved in the discussions.”
GDP growth forecast cut to 1%
EY Item Club will this week cut its estimate of UK GDP growth for next year from 1.5% to 1%, with uncertainty over the UK’s future relationship with the EU and the trade war between the US and China driving the revision.
It will cut its 2021 growth forecast from 1.8% to 1.5%; its 2022 prediction 0.2% to 1.7% and its 2023 forecast to 1.8% from 2%.
South East home to 9 in 10 top income tax towns
Analysis by UHY Hacker Young shows that commuter towns in the South East pay the highest levels of income tax in the country, with 9 of the top 10 towns for average income tax located in the area outside London dubbed the Stockbroker Belt.
Surrey’s Esher took the top spot, with residents paying 28% of their average £68,600 earnings in income tax. UHY Hacker Young tax partner Neela Chauhan said the South East has “cemented its position as one of the most affluent areas in the UK,” adding that this is “likely to continue for years to come” as the towns attract high earning celebrities and City workers. Ms Chauhan urged the Government to be “careful not to kill this golden goose by overtaxing it,” adding: “We have seen signs in some areas, such as non-doms, that higher levels of tax is gradually driving high earners out of the country.”
Electric cars better value after two years
A study by PwC suggests that despite higher upfront costs, some electric cars are cheaper than their petrol equivalents after less than two years because of lower running costs. Looking at six of the most popular models, it was found that they were better value for money after an average of seven years for conventional road users, and about four and a half for owners who drive more.
Living Wage boost
A study by KPMG shows that the number of workers paid below the real Living Wage has fallen to a seven-year low, with 20% of roles now paying below the voluntary figure of £9 an hour – and £10.55 in London. While 12% of full-time jobs pay less than the figure, 38% part-time roles fall short of it.
KPMG’s James Stewart said that while Brexit has impacted the jobs market, employers “have taken decisive action to retain and motivate workforces.”
Findings from four day week trials
Microsoft trialled a four-day work week in its Japanese offices.
The firm found that the experiment—in which 2,300 employees took five consecutive Fridays off in August—boosted efficiency, worker happiness and productivity by 40%.
Microsoft will run another experiment in Japan, but it has not said whether its employees should look forward to four-day work weeks on a permanent basis.
Brexit uncertainty hits confidence
A quarterly report from the ICAEW shows that confidence among business professionals hit a decade low due to Brexit uncertainty, political instability and weak growth between July and October.
Meanwhile, EY Item Club has warned of slowing economic growth, cutting its estimate for 2020 to 1%, down on the 1.5% it forecast in August. “Even if the UK leaves the EU with a deal on January 31, 2020, significant uncertainties will remain,” its report said.
Order, Order
British MPs elected Sir Lindsay Hoyle as the Speaker of the House of Commons, to succeed the colourful but divisive John Bercow, who stood down last week after a decade keeping order in debates. Sir Lindsay, a Labour MP, had been Mr Bercow’s senior deputy. In keeping with parliamentary tradition he was dragged to the Speaker’s chair, feigning reluctance.
Parliament shuts
It’s the U.K. Parliament’s final day in Westminster before being dissolved, as politicians prepare for the country’s first December general election since 1923.
Early blows traded between Prime Minister Boris Johnson and his main rival, Labour’s Jeremy Corbyn, are setting the tone for a dramatic campaign, while the former’s controversial backing by some hedge funds is garnering more and more attention.
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.
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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 your 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.
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Success lies in both recovering money and keeping customers happy. The Credit Protection Association was founded in 1914 and has helped tens of thousands of UK businesses to collect outstanding payments and reduce the risk of incurring bad debt. We believe that creditors deserve to be paid for the work or goods they have supplied but we fully understand the need to maintain
the best possible relationship with customers!
At The Credit Protection Association, we provide solutions, advice and back-up in all areas relating to the supply of services or goods on account. Client-members receive everything they need from a single source to reduce debtor days and write-offs.
The Credit Protection Association has helped has assisted tens of thousands of UK businesses with their credit control requirements, since the First World War.
We are polite, firm and efficient when it comes to recovering outstanding debt.
“We have used CPA for a number of years now. The website is easy to navigate around with lots of helpful reports. The staff are always at hand and very friendly. CPA has helped us reduce our debt over the years and keep track of potential issues with our customers.”
~ CPA client in Buckinghamshire
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~ Credit Controller client in Warrington
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.
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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
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.
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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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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections