Number of businesses in critical distress soars.

4th February 2019.

More critically distressed UK businesses

The number of British businesses in critical distress leapt up by 25% in the last quarter of 2018 according to new data from Red Flag Alert, with analysts dubbing the period a “winter of discontent” for UK business. Results show that 2,183 businesses were in “significant” distress in the fourth quarter of the year — up 25% on the same period in 2017. Meanwhile, the number of businesses in “significant” distress rose by 15,000 in the last quarter to an annual total of 481,000.

Conditions have been difficult for businesses across all sectors, with corporate collapses reaching the highest levels in five years in 2018 as rising business rates and wage costs, inflation, tightening credit and low consumer confidence all added pressure. Economic uncertainty related to Brexit has also played a role in slowing investment, with analyst Judie Palmer noting: “It seems, for the last quarter at least, that big business is holding out for a decision on the terms of Brexit in order to see where investment is best placed, which is having a knock-on effect on confidence.”

Construction, retail and hospitality businesses are worst affected

Companies in the construction industry appear worst affected by market challenges, followed by retailers and those in the dining and hospitality sector. For retailers and restaurants, the rise of online shopping continues to cause significant disruption, as staff wage costs become less tenable amid a drop in footfall. A string of major High Street retailers collapsed last year, with HMV entering administration in December and others including Debenhams and M&S reporting disappointing trade over the Christmas period. In the construction sector, the collapse of industry giant Carillion early in 2018 set the tone for a 13% annual increase in construction businesses going insolvent.

Small businesses threatened by ripple effect

The collapse of major companies has a noticeable ripple effect on smaller businesses, who frequently suffer from postponed payments and delayed orders as a result of client company failures. Recent months have seen an increase in companies arranging contingency borrowing facilities to handle these risks, with rises in renewals and extensions of existing facilities at an all-time high. So-called ‘zombie’ businesses – small companies which are just able to service their debts – have been collapsing in growing numbers as lenders clamp down on loan payments.

In such a climate, robust credit management systems are more than ever – important for businesses. Companies seeking to prepare for the predicted change and disruption of 2019 will need to ensure that their balance sheets are as strong as possible by taking time to ensure overheads are streamlined and outstanding payments are settled.

How CPA can help

In this stressful times, you can’t afford to let treat overdue accounts passively. You need to take action quickly to recover  what you are owed. You can be sure the other people your customers owe money to will be chasing them  creditors will so guess who will get paid and who will not.

With things changing fast and companies disappearing you need to regularly check your customers too to make sure they are still financially stable and credit worthy. Just because they could afford your invoices last year is no guarantee that they can afford you this year. So credit check your customers and continue to trade with confidence.

In these difficult times, you need strong partners and we can help you do both.

The Credit Protection Association has been serving small businesses for over 100 years.  CPA have collected billions on late paid invoices for our members and helped take the strain off business owners during difficult times. CPA can get your unpaid invoices to the top of your debtors to do list.

At the Credit Protection Association,we provide a suite of credit management services to help you avoid and deal with late payers.

We provide first class credit information that can help you avoid being over extended to customers who are at risk.

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

Our debt recovery services also chase down late payers, resolving over 80% of debts referred, recovering  money that our members can then put to work within their own businesses.

Our members have used this boost to their cash flow to fund investment in new projects, additional materials, new staff, extra equipment or new technology.

At the same time, our credit checks and credit reports are utilised by our members to investigate all suppliers and customers. It is important to keep an eye on your key business partners – Suppliers and Customers – to ensure their are on a firm financial footing.

Our reports help avoid bad payers or being over extended to a customer beyond their means.

We come across business owners who have been burnt before working or providing goods on credit because the hassles were not worth it.

Our services have helped them go  back in to trading on credit with confidence

Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper.

And our new Late Payment Compensation department could unlock hidden potential in your accounting records and uncover the hidden compensation you are owed by past customers that could be used to give your business the cash flow injection it needs.

Give us a call to find out how we can help.

James Salmon, Operations Director, 4th February 2019

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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!

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