2018 is "Year of the CVA" - CPA | The Credit Protection Association

2018 is “Year of the CVA”

3rd April 2018.

The Times’ Deirdre Hipwell talks to experts about the increased use of Company Voluntary Arrangements (CVA) by retailers, with six used in the first three months of this year, from Toys r Us and JJB Sports to BHS.

Diedre Hipwell has termed 2018 the “year of the CVA”, and she might well be right. We are only three months into the year, and it has already been littered with insolvencies and company closures, with some falling to CVAs and others merely falling. The so-called ‘retail apocalypse’ has tightened households budgets and kept company profits low, while the heightened popularity of online retailers has all but emptied high streets. This month alone Carpetright has announced plans to shut stores across the UK and Ms Hipwell expects more will follow the flooring retailer’s example.

At the Credit Protection Association, we have been approached by retailers fearing insolvency. Business owners who find themselves at the cliff edge perceive CVAs and insolvency as their inevitable future; fortunately, this is not the case. Our experts at CPA look into our members’ finances and have unlocked inner potential and not only pronged lifespan, but propelled the business’s prospects.

A company voluntary agreement involves a company proposing to pay back its creditors by cutting costs by changing existing contracts, such as ending lease agreements on property.

Although CVAs can result in creditors losing money, they are widely considered to be fairer than a pre-pack administration, where a newly formed business buys the assets of a failed business, shedding all its debts in the process.

Jonathan De Mello, head of retail consultancy at Harper Dennis Hobbs, said: “CVAs, once an absolute last resort mechanism, are increasingly being used in 2018 to ensure fitness for purpose in today’s multichannel world and also as a buffer against the Brexit storm to come. Though there are some notable examples of successful CVAs over the past ten years — Game, HMV and Dreams spring to mind — CVAs have often merely delayed the inevitable [of] full administration.”

Rob Croxen, a restructuring partner at KPMG added, however, that “a CVA is not the answer in itself. It has to be part of a wider solution to facilitate a turnaround of a business

It is not easy trading on the high street at present, from falling profits to skyrocketing fees, business owners are struggling to make ends meet. The answer lies in investment, however, with many business owners profiting from purchasing new equipment, new technology or new offices. With online retailers proving themselves to be tough competition, the high street has to be prepared to fight back.

At the Credit Protection Association, our debt recovery services give our members the opportunity to expand their business. The digital customer is demanding more automation as they need a retail experience that is adapted to their day-to-day life. Boasting an attractive website and mobile-friendly online services will help you compete with your e-commerce rivals, and boost your profits too.

Even if you already believe yourself to be defeated by the competition and are dangling on the cliff edge, we can provide you with a lifeline. While our debt recovery services free up your cash flow, and our credit management products spring clean your finances, our LPC team could unlock hidden potential within your business you didn’t know was there.