Zombie Companies Rise –  business news  29 July 2020.

29 July 2020.

James Salmon, Operations Director.

Zombie companies rise, the K recovery, £49 billion in SME debt, retail recovering, furloughing, the eat out scheme, covid-19, markets and a lot more of the business stories we have seen that will interest our readers and members.

Here are CPA we want to  share the business news stories we have seen that we think will affect our members and readers. Many of us are busy fighting to protect our businesses and therefore might have missed some of the news that could impact small businesses, their owners and those that sell on credit.

Zombie Companies Rise

The number of small businesses going insolvent has fallen despite the covid lock-down as government funding provided a lifeline for lots of companies.

However, experts warned the failure rate will increase in coming months as many ‘zombie’ firms are forced out of business.  5,699 insolvencies were recorded in the UK in the 14 weeks after the lock-down was introduced in late March, down 20 per cent from 7,124 in the same period last year.

The furlough scheme, low rate finance, government backed loans,  and grants and changes to the insolvency law has meant that many companies that were technically insolvent even before covid-19 have been able to postpone their demise but are effectively zombie companies just awaiting the inevitable.

Julie Palmer at business recovery specialist Begbies Traynor noted that with government initiatives to support businesses now winding down problems will mount during the autumn, warning: “This crisis will force many zombie companies out of business.”

Commenting on a huge rise in “zombie companies” being kept afloat during lockdown that are now desperately hanging on, Douglas Grant, Director of Conister Finance & Leasing Limited, said: “We are facing a significant double dip recession that could last well into late 2021 and the economy will be hurt by both SMEs closing and mass redundancies for a significant part of the workforce. SMEs are not just the lifeblood of the economy, it is where innovation and creativity happens. Since 2008, alternative lenders have risen in prominence, working alongside larger more traditional clearing banks, offering a funnel of vital liquidity through tailored and flexible lending solutions to SMEs. Today there are significant amounts of private capital waiting to be invested in resilient SMEs and the market share of clearing banks has fallen significantly in a far more diversified lending sector. In the last 12 years, banks have also become much better capitalised than during the Global Financial Crisis. Previously businesses could service debt from remaining cash flows with little or no capital for investment which resulted in a zombie status for many UK SME borrowers. It appears this dangerous trend is re-emerging and according to The City UK, it is estimated that businesses may build up £100 billion of debt by next March which they would be unable to repay with 780,000 SMEs in danger of insolvency.

“Since the epidemic took hold, the UK Government has been quick to back sectors that are resilient to recessions and market volatility, providing financial security and protection through initiatives such as the bounce-back loans scheme. It is imperative that SMEs have a tripartite level of sustainable support from Government, alternative and traditional lenders working together to identify and protect the more resilient sectors such as infrastructure, technology and renewables, ensuring their existence guaranteed. This is where alternative lenders that understand the characteristics of specialist SMEs and with the flexibility they offer, empower their staff to make judgement calls on capital requirements often in the infancy stage of lending, can provide the additional support and natural lending progression alongside the larger clearing banks. Larger clearing banks will not be able to keep the UK SME sector alive by themselves.”

Pandemic brings split in fortunes

We have had the V, the W and now we have the K recovery. Capital Economics is predicting a K-shaped economic recovery in Britain, with the company’s chief UK economist Paul Dales explaining: “The upward leg is the ‘haves’ who have kept their jobs and the downward leg represents the ‘have nots” who have lost theirs.” Dales continues: “I can’t quite think of any recession which has had such a big difference on people’s incomes. Some people are sitting there with piles of cash in the bank and others will be wondering how they are going to buy food. The aggregate picture disguises a massive difference.”

Total of £49bn lent to SMEs during pandemic

Newly released Treasury data shows that banks have now lent some £49.4bn through the three main loan schemes backed by the government. The bounce back loan scheme (BBLS) has seen £33.7bn distributed, while the coronavirus business interruption loan scheme (CBILS) has seen £12.7bn given to small and medium-sized firms. A further £3.1bn has been issued through the coronavirus large business interruption loan scheme (CLBILS) for larger businesses.

Boost to rural economy as demand grows

The market for farms and land in Scotland is showing very positive signs of recovery, according to Andy Ritchie, partner at Campbell Dallas, who said: “Rising demand for agricultural and land businesses will almost certainly result in the buyers investing in their buildings, plant, machinery, infrastructure and services. Scotland’s rural economy will benefit, and we will hopefully also see an increase in rural employment.”

Retail sales show signs of recovery

The monthly distributive trades survey from the CBI shows that the balance of retail sales balance had rebounded from -37 in June to +4 in July – the highest reading since April 2019. However, real-time data suggest sales have already dropped back considerably, says Samuel Tombs at Pantheon Macroeconomics, “now that pent-up demand for durable goods has been satiated.”

NIESR says ending furlough a mistake

Garry Young, deputy director of economic research group the National Institute of Economic and Social Research (NIESR), says plans to wind down the Government’s furlough scheme seems to be a mistake, “motivated by an understandable desire to limit spending.” Mr Young went on: “Unemployment is going to rise to about 10% by the end of this year, before dropping back next year, and we think that an extension of the furlough scheme would have been a relatively inexpensive way to limit that rise in unemployment.” NIESR economists also urged the Government to conduct a “comprehensive tax review” to decide how to rein in borrowing.

Over 50,000 outlets sign up to Eat Out to Help Out Scheme

More than 53,000 outlets across the UK have so far signed up to the UK Government’s Eat Out to Help Out Scheme – and a new official Government online finder is available to help diners locate them. The logo means diners that eat-in will benefit from a 50% discount, up to a maximum of £10 per person, on food and non-alcoholic drinks, any Monday to Wednesday in August – and no voucher is required. Diners can take advantage of the offer as many times as they like during the month. Chancellor of the Exchequer Rishi Sunak said: “Our restaurants, cafes and bars play a vital role in our economy, employing more than a million people. They have been hit hard by coronavirus, so it’s vital we do everything we can to help them re cover.”

Offices are important to our work/life balance

In a letter to the Financial Times, PwC Chairman Kevin Ellis says that the “virtual world is no substitute for human contact” and that the pandemic “has proved to me the importance of offices to the work/life balance equation.”

Foxtons hails recovery in UK property market

Foxtons has reported that lettings are almost back to pre-crisis levels and sales are well up on April and May. CEO Nic Budden says he is “cautiously optimistic” for the rest of the year.

Covid-19 general news

In response to the negative reaction to the blanket quarantine announcement on Spain,  the Government is reportedly considering putting in place quarantine measures for certain regions of foreign countries rather than the whole country, transport minister Baroness Vere confirmed. Speaking in the House of Lords yesterday, Vere said “for the time being we are taking the approach by country for border measures, but it is the case that it could be that we could put them in place for regions in the future”.

The UK Government has signed a fourth coronavirus vaccine deal, securing up to 60 million doses of an experimental treatment being developed by drug giants GSK and Sanofi. The government has already signed up for 100 million doses of the Oxford University vaccine being developed by AstraZeneca. It has also secured another 90 million doses of two other promising vaccines.

China reported a rise in new covids cases, mainly coming from local infections.

The U.S. neared 150,000 deaths although daily infections slowed in some of the hardest hit states.

America’s top infectious disease expert, Anthony Fauci, said it’s “reasonable” to say that by December we’re going to have an effective vaccine. The comments came as Moderna Inc.’s drug candidate was shown to protect against the virus in a trial that inoculated 16 monkeys.

Germany recorded 3,611 new infections in the past week; the head of the country’s public health agency criticised Germans for being “negligent” in social distancing.


London markets were marginally up yesterday with housebuilders leading the charge after the Government was reported to be considering an extension to the help to buy scheme.  Overnight in the US the NASDAQ fell 1.27% and the S&P fell 0.65% after several large companies reported earnings that revealed a larger hit from the coronavirus pandemic than investors had been expecting.

In Asia, Nikkei closed down by 1.15%. Hong Kong HSI is up 0.41%. China Shanghai SSE is up 2.04%. Singapore Strait Times is down -0.19%.

In the last few weeks, the pound has gained ground on growing hopes for Britain’s economic recovery, while the euro surged on the EU’s agreement of a €750 billion recovery fund. The pound -euro exchange rate dipped from highs of €1.11 to lows of €1.09  but currently sits at €1.104. Meanwhile, pound has strengthened against a weak US dollar from lows of $1.25 to highs of $1.297 this morning, while the Euro soared to around $1.175. Goldman Sachs warning that the dollar’s world reserve status is at risk.

Oil Prices were mixed as record increases in COVID-19 infections in some U.S. states raised concerns about fuel demand in the world’s biggest crude user, wiping out earlier gains after a surprise drop in U.S. crude inventories.

Gold Prices eased as the dollar briefly halted its slide and investors booked profits from a record rally, with some caution setting in as focus turned to a U.S. Federal Reserve meeting widely expected to reinforce loose monetary policy.

Digital tax ‘would penalise innovative online retailers’

Sam Dumitriu, research director at The Entrepreneurs Network, writes in City AM on rumours that the Chancellor is considering a new online sales tax. He notes that “An online sales tax won’t just punish the Amazons of the world. Since the lockdown, thousands of small shops have used e-commerce to stay afloat and diversify their income when the Government shut down their ability to trade physically.” The article concludes that a new model for town centres seeing a hybrid of live and workspaces “certainly makes more sense than a new digital tax that would be an insult to the innovative online businesses that have got us all through lockdown.” Elsewhere, the Times reports on claims by the Taxpayers’ Alliance that a 2% levy on goods sold online could cost the average household an extra £56 per year. Finally, Tim Newark in the Express says the tax could pay for the abolition of business rates and help save the high street.

Is a tax on the unearned value of our homes inevitable?

Writing in the Times’, James Kirkup, the director of the Social Market Foundation, says one day the Government will have to bite the bullet and raise taxes to pay for its pandemic borrowing. But will a Conservative government be brave enough to do the sensible thing and tax property wealth, he asks. Kirkup thinks Labour leader Sir Keir Starmer will win plaudits for proposing such a move. A rising star in the Tory party admits to Kirkup: “Taxing property wealth is the sensible thing to do and it’s probably inevitable. But it’ll probably be a Labour government that introduces it – we just won’t reverse it when we’re next in office.”

Pension freedom inquiry launches with probe into scams

The Work and Pensions Committee has launched an inquiry into the impact of pension freedoms and level of protection for pension savers. The three-stage “broad inquiry” will investigate how savers are protected as they move from saving for retirement to using their pension savings under freedom rules. Andy Agathangelou, founder of Transparency Task Force, said: ”The pension scams pandemic that is blighting so many pension savers in the UK, is a festering sore on the face of the pensions industry that desperately needs treating.”

Net cash inflows up at St James’ Place

St James’ Place has reported a rise in net cash inflows of 2% to £4.5bn in the six months to the end of June. Pre-tax profit for the period was up from £57.3m to £221.9m, with the firm’s underlying cash result falling to £114.4m. Chief executive Andrew Croft remarked: “We began the year with renewed confidence and momentum in the business as we saw investor sentiment rise following the UK General Election in December 2019, but this gave way to a challenging external environment in the UK as COVID-19 related lockdown and associated social distancing measures impacted the way we and the Partnership conduct business.”

Don’t let Covid-19 bust your business!

It will if your cash flow dries up, either sooner or later.

The Credit Protection Association (CPA) has been assisting thousands of UK businesses to get paid since 1914. We have seen many financial crises, this one will be particularly deadly for suppliers for sometime to come.

CPA eases cash from tardy debtors – Efficiently, Effectively, Economically and Ethically. Above all tactfully, because maintenance of goodwill is paramount.

To meet the needs of creditors in the current crisis, we have designed a “critical care” package especially tailored for the situation.

  • The annual package costs start at very low rates
  • A minimum performance warranty is provided
  • Several complimentary services included

Clients instruct CPA on-line via their PC or phone, completely user-friendly. Your late paying customers are told to pay you direct (not to us).

A very recent report shows a 23% increase in the number of unpaid invoices since March 11th THIS YEAR – are you getting a build-up of late payers?

 Right now, overdue accounts must be a concern and CPA has a great track record of encouraging slow-payers to pay their suppliers quickly.

It takes less than 17 minutes to see how you would benefit, do you have the time now?

No face-to-face meeting required – just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email nsm@cpa.co.uk today.

When you see your money come in, you will be so glad you used CPA.

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 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.

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.

You might be hesitant about contacting a debt collection agency. What are they going to be like?

Can they help your particular type of business?

There is no need for concern. CPA are courteous, helpful and very probably have had direct experience of working with your type of business.

Debt collection agencies are not all alike.

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

“The service from CPA has proved to be everything that you said it would be. We have already seen a huge benefit. We have had a number of overdue accounts paid promptly and directly to us. It is also a huge weight off our mind to know that once we have passed an overdue payment over to you, you take care of everything whilst keeping us informed.
~ 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.

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.

New PM should walk the walk and back small firms over late payments

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