Summer is the perfect time for making new friends and connections, catching up with old ones and dancing the night away with them all in a nightclub - sometimes not emerging until it’s light again outside!
But operators are reporting that this important rite of passage and critical part of the UK’s night-time economy is under increasing threat and might be a thing of the past quicker than you’d think.
New research from the Night Time Industries Association (NTIA) has revealed that one in five nightclubs (20%) have closed for good since the first Covid-19 lockdowns were instigated in March 2020.
While the trend of nightclub openings v closures has generally been downwards over the past 15 years, the downturn of the previous two years is the most dramatic.
According to the NTIA, there are now only 1,130 nightclubs operating in England, Wales and Scotland. In March 2020, this number was 1,418. Some parts of the country have fared worse than others with the Midlands alone losing nearly 30% of its nightclubs.
In a statement the NTIA said: “Operating cost pressures coupled with consumers with less disposable income have seen the early stages of a recession with slowing ticket sales and visitor frequency.
“The situation is also having a knock-on effect on other businesses. The prices are going up and everyone is trying to save some money because the cost of living is going up day by day and we’re struggling now.
“The culmination of pandemic debt, growing energy bills, workforce challenges, supply chain issues, increased insurance premiums, landlord pressures and product cost increases have created a perfect storm.
“The government needs to recognise the economic, cultural and community values of clubs and the wider night-time economy. We must protect these businesses, using every means possible and recognise their importance before it’s too late.”
A government spokesperson responded: “We’ve stood behind the hospitality sector throughout the pandemic with a £400 billion package of economy-wide support that saved millions of jobs and offered a lifeline to hundreds of night-time businesses up and down the country.
“We recognise that nightclubs are important cultural institutions and key drivers of local night time economies, but no national government can control the global factors pushing up the price of energy and other business costs.”
One of the immediate impacts on nightclubs and other hospitality businesses is the return of business rates. Until June, the industry was exempt but now will receive a 33% reduction meaning they will have to pay 66% of the normal charge for the remainder of the financial year.
Chris Horner, insolvency director with BusinessRescueExpert, said: “As we’ve recently reported ourselves, the entire hospitality sector is taking a beating but nightclubs especially are an intrinsic part of the hospitality and entertainment industry.
“Not only themselves but supporting and symbiotic industries such as takeaways, taxis, smaller pubs and bars that people stop off on their way to the club - all are affected by closures the same way a construction company would be by their main supplier going into liquidation.
“What’s happening with nightclubs might be indicative of a wider change in society and customer behaviour but if you’re running a business you can’t afford to take a sociological perspective on things - you have to act and do it while there is still time to effect improvements and changes.”
Change is inevitable and is the natural order of things. One friend we suggested this to disagreed so we told them to put a banana in a paper bag for two weeks and then reevaluate their position.
Change can seem daunting at first but can ultimately be beneficial and transformative. Toyota began life as a loom manufacturing company after all.
But change works best when it’s done with a sense of agency - not when it is forced upon a person or a business because they are out of options.
We offer a free initial consultation to any business owner or director that wants to change their business for the better or can sense change coming whether they like it or not and wants to make sure they can withstand it.
Once our advisors have an understanding of the unique situation facing the firm then they will be able to run through the various options available to them - often with more scope than they originally thought they might enjoy.
But this is only if they get in touch early enough in the process. If they leave it too late then they could be subject to irresistible change without much scope to adapt to it or take advantage.
Don’t leave things to chance - get in touch today.
As we’ve recently reported, the level of bounce back loan fraud is increasing with more directors looking to strike off or dissolve their companies to avoid repaying the loans and other lawfully accrued debts to creditors.
The 100% government backed bounce back loan scheme was part of a range of measures introduced in 2020 after the Covid -19 pandemic forced the country into lockdown.
Unfortunately, some unscrupulous directors began to look for loopholes in the rules, such as claiming false furlough payments and defrauding the government’s Covid support packages that were meant to help businesses.
In an effort to crackdown on those who abused the UK government’s pandemic support packages, ministers introduced legislation last December that gave the Insolvency Service additional powers to investigate and sanction directors that abused the systems to escape their creditors.
Business minister Lord Callanan said: “The government provided unprecedented support to businesses to help them through the pandemic, but unfortunately a minority of people abused this support for personal gain and they should now be clear that we will not tolerate those who seek to defraud the taxpayer.”
He was speaking after the Insolvency Service revealed details of four directors being disqualified after they all secured bounce back loans before dissolving their companies to avoid paying their liabilities back.
There were over 1.4 million small and medium businesses who chose to take out bounce back loans to help them survive the lockdowns, with up to £50,000 offered interest free for over a year.
The government provided full guarantees for banks on about £46bn of these emergency loans, but with few checks on eligibility the scheme was open to exploitation by fraudsters.
As we’ve reported previously, the Insolvency Service is just one of several agencies that the government has tasked to pursue the outstanding billions owed. But they are balancing this work next to a lack of resources compared to other agencies chasing the overall abuse of coronavirus schemes.
They are having some successes, however.
Between March 2021 and May 2022, the Insolvency service reported that it disqualified at least 162 directors following allegations they abused Covid-19 support programmes.
Originally they were limited to using formal legal and insolvency processes such as court led winding up petitions of companies.
However, the new powers contained in The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act, which became law in December 2021 extended the Insolvency Service’s investigatory powers on behalf of the Business Secretary, to directors of dissolved companies to allow them to investigate directors without the need to launch a formal insolvency process.
These can carry serious consequences for directors who have improperly used or obtained funds, or have been able to dissolve their business with outstanding debts.
These directors can face sanctions including being disqualified as a company director for up to 15 years or, in the most serious of cases, prosecution.
Chris Horner, insolvency director with BusinessRescueExpert, said: “BBLS repayments are catching a lot of businesses out that would have expected to be performing better or at least up to their pre-pandemic levels.”
“The bounce back loan and other support measures were important at the time and undoubtedly helped many businesses to stay afloat under the most trying of circumstances, but now these measures have gone and businesses have tough decisions to make if they are having trouble servicing outstanding debts incurred during the pandemic.”
“Dissolution is only to be used by solvent businesses that can pay off their debts within 12 months otherwise directors could be in trouble.”
“It’s most likely that a business with an outstanding bounce back loan would need to consider a CVL, but only after taking professional advice and exploring the options available”
We offer a free initial consultation to any business owner or director who is concerned about the future of their business whether they have an outstanding bounce back loan or not.
Once our expert advisors have a clearer understanding of the unique factors and situation of the business, they will be able to go through all the options available - that will probably be more than you originally thought you had, especially if your business is already having trouble meeting all your obligations.
The sooner you get in touch and get advice, the quicker you will be able to activate your recovery plan - which could start today if you click the link above and book your session now!
Over the past two years, a lot of sectors have come under pressure because of Covid-19 and subsequent lockdowns.
But it’s possible to argue that hospitality has suffered the most in these exacting circumstances.
First to close, last to open was a common scenario whenever a lockdown arrived, making those in the hospitality sector more vulnerable to shifts in customer confidence than any other too.
New research for the industry has shown that during the 12 months to May 2022 some 1,406 restaurants closed their doors in the UK, up 64% on the previous year. This is an even larger increase in closures in comparison to the wider hospitality industry, which saw a 56% rise in insolvencies over the same period.
So what is affecting the restaurant industry more than other sectors right now?
In June, inflation hit a 40 year high of 9.4% and is showing little prospect of reducing in the near future as analysts warn that inflation could rise as high as 12% by October.
This new and unsettling trend has eaten into household income at a rate not seen in nearly 20 years and because of this, businesses across the UK have been dealing with a slowdown in consumer spending as people are cutting out non essential items to cope with the cost of living spike.
An average restaurant could see the number of diners visiting down by as much as 40%, while the cost of some ingredients have gone up by 40% or more.
Figures show food costs from wholesalers have risen by 8-12% as well as the VAT rate for the sector moving from the temporary 12.5% figure back to 20%.
On top of the rise in price for ingredients, a whopping 93% of hospitality operators report higher energy costs at the same time that rents are also beginning to rise. There is a further predicted increase in annual energy prices in October which are uncapped for businesses and could see them rise annually by thousands more pounds.
Another issue looming over the hospitality industry is the number of roles that remain vacant, with one in seven hospitality jobs currently unfilled.
In order to combat this, 77% of operators have increased pay to retain and attract staff which has resulted in an 11% increase in average pay levels for hospitality staff over the last year.
However despite this effort nearly half (45%) of businesses have had to reduce their trading hours and a third have had to close for at least a day to manage with the lack of availability.
Hospitality businesses from across the country are finding it difficult to balance absorbing the costs and passing on the pain to customers who are also struggling to cope with rocketing prices; data shows the average dining out spend has declined by 9% per visit already according to Lumina Intelligence Eating & Drinking out Panel.
Customers are already sure that they will try to save money on their total bill by reducing the number of courses ordered. Around 40% of those who typically order 2 courses indicated a likelihood to downgrade to just a main course. 60% of those ordering 3 courses would downgrade to fewer courses too.
The Government has recently launched a consultation on the transition for the next business rates revaluation and UKHospitality, the leading industry body for the hospitality sector, is using it to highlight the impact of the pandemic on property value and the financial fragility of the hospitality industry and emphasise the need to ensure that any reduction in business rates is reflected in the bills as rapidly as possible.
In a full response, UKHospitality has called for the continuation of business rate relief for restaurants and bars hit the hardest during the pandemic, an assurance that the scheme will allow for all businesses to reach their true reduced value form April 2023, a cap on how much bills can rise and no RPI inflation increase to the total sum of business rates.
UKHospitality CEO, Kate Nicholls, said: “The priority must be enabling reductions in bills to be felt immediately and the Government needs to ensure that the cost is reduced for those sectors hit hardest by the pandemic and in most need of support.
“We strongly believe that the Government needs to reflect the unprecedented impact of the pandemic, compounded by the impact of an economic downturn and high levels of inflation, in the new rates scheme. If this is taken into account, the hospitality sector can play its full part in the wider UK economic recovery, creating jobs and delivering skills and boosting our high streets and communities.”
With customer confidence falling, dining out and takeaways are among the top five areas where customers are figuratively and literally tightening their belts instead of loosening them.
This combined with the inflation and energy prices showing no signs of improvement, hospitality businesses are in for a difficult few months ahead.
If you are struggling, or worried about what’s round the corner, take advantage of some free advice, we can let you know what options are available to you, so that no matter how Autumn unfolds you can still have your menu set accordingly.
We offer a free initial consultation to help anybody who wants to strengthen their business before tough times come along - or if they’re in immediate danger of succumbing to debts.
Even if your business is not in hospitality, it’s important to consider that if the cost of living can impact something as universal and loved as the fish and chip industry, then it could happen to your business too.
We’re all familiar with the story of King Midas.
The ancient ruler who wished that everything he touched would turn to gold, thinking it would be the greatest benefit ever but rapidly discovered that it was an incredible curse.
There’s been a lot of other similar stories about gifts that have proven to be too good to be true and ultimately, a negative such as the Trojan horse.
Sadly, for hundreds of small businesses it’s beginning to look like the bounce back loan scheme is going to join the list of items titled “be careful what you wish for”.
A new Freedom of Information Act request to the British Business Bank, which administered the original bounce back loan lending scheme, has revealed that 193,000 small businesses are now in default on their repayments.
This is up from 106,209, the last total available in September 2021. This is the equivalent of one in eight of the original 1.5 million borrowers that accessed the scheme during the pandemic lockdown.
While it’s true that the majority of borrowers were meeting their monthly repayments, this is still a sizable fraction that will add up to millions of pounds not being recouped by the Treasury.
Of the arrears, 151,000 are more than 90 days behind in their scheduled repayments which is usually a sign of serious financial difficulties.
The loan scheme issued £47 billion of loans of between £2,000 and £50,000 from May 2020 to March 2021 with fewer checks and safeguards to expedite their issue.
As the loans were ultimately underwritten by the government, lenders were able to suspend their usual procedures and safeguards but this has contributed to the estimated £4.9 billion of bad debt that includes fraudulent borrowing as well as unpaid arrears.
The recovery has already come under scrutiny this year with the National Audit Office (NAO) describing the anti-fraud measures employed as inadequate with the only checks being introduced being to prevent multiple applications a month after the scheme was launched.
In January this year, Lord Agnew of Oulton resigned from the government over what he called the “cack handed implementation and catastrophic follow through” of the efforts of the BBB and BEIS in recovering owed amounts.
A spokesperson for the BBB said: “Over 85% of facilities provided across three Covid loan schemes (bounce back loans, the coronavirus business interruption loan scheme (CBILS); and the scheme for larger companies called CLBILS) have either been fully repaid or are meeting monthly payments as scheduled, as at end of March 2022.
“If borrowers have concerns about being able to repay their bounceback loan, they should approach their lender in the first instance to explore the pay as you grow options available under the scheme, or alternative arrangements where appropriate.”
Chris Horner, Insolvency Director with BusinessRescueExpert, said: “The greatest strength of the bounce back loan scheme - the ease of access - ironically might end up being its greatest weakness.
“As we’ve seen with the latest corporate insolvency figures from the Insolvency Service for June, the number of insolvencies and liquidations, especially creditor voluntary liquidations (CVLs) are rising - especially year-on-year.
“Summer is usually a time of respite for businesses when customers and staff can go on holiday and give the directors some space to think about their next moves and the direction they want to take their business in.
“Well, this year, to accompany the record breaking temperatures causing misery we can add rising inflation, higher interest rates, falling consumer spending, energy bills about to rocket once more, global supply chain disruption and the conflict in Ukraine playing out with several unforseen knock-on effects.
“A business that’s already having trouble with bounce back loan arrears will soon have a lot of additional worries to contend with, so they should use what time they have now to get some professional advice on what they can do to improve their prospects for the rest of this year and the future.”
We offer a free initial consultation to any business owner or director who’s concerned about the future of their firm and we’re struggling to remember a time when it could be so valuable given a set of circumstances converging all at once.
Once our expert advisors have a clearer understanding of the unique factors and situation of the business, they will be able to go through all the options available - that will probably be more than you originally thought you had, especially if your business is already having trouble meeting all your obligations.
The sooner you get in touch and get advice, the quicker you will be able to activate your recovery plan - which could start today if you click the link above and book your session now!
Summer has finally arrived and along with most of us, many businesses are starting to genuinely feel the heat.
The manufacturing sector is especially worried about the coming few months and with good reason.
Make UK, the trade body for manufacturers, have released research that shows how members are planning to weather the immediate storm amid a worsening economic outlook, with costs rising and opportunities stalling.
They found that more than two thirds of manufacturers (67.8%) said that rising energy costs were causing “catastrophic or major disruption” to their daily operations.
Another 71.9% said that increased raw material costs would have the biggest damaging impact on their working patterns while 66.8% pointed toward rising transportation costs having a similar effect.
Stephen Phipson, chief executive of Make UK said: “Rapidly rising input costs, ballooning energy bills and in some cases inflation busting pay settlements have hit margins and frozen investment plans.
“There is now a strong case for Government action to help UK manufacturers weather this immediate storm and incentives investment for long-term growth.
“Clearly some of the factors impacting companies are global and cannot be contained by the UK government alone.
“However, just as it is quite rightly taking measures to protect the least well off, given the rate at which companies are burning through their balance sheets just to survive, it must take immediate measures to help shield companies from the worst impact of escalating costs and help protect jobs.
“The government moved swiftly to implement the furlough scheme two years ago; it would be a wasted investment if the jobs saved then are lost now.”
A government spokesperson said: “We continue to support our manufacturers, including through the tax system with the Annual Investment Allowance and the super-deduction - the biggest business tax cut in modern British history.
“This comes on top of an increase to the Employment Allowance, a cut in fuel duty and an extension to schemes for energy-intensive industries to help manufacturers with higher energy bills.”
“A hat trick of hurt” is heading for SMEs this summer
The research further underscores the country-wide scenario that the rising fuel costs, higher wages and the surging price of imports and raw materials are forcing hundreds and thousands of small and medium sized businesses to change their behaviour.
While manufacturers are spending more on securing basic raw materials and components needed to supply their customers now, it makes it harder for them to look at the medium term with any confidence.
Make UK’s senior economist Fhaheen Khan said: “Our recent reports have found that investment cash and expansion plans are being shelved because more funds are tied up securing supplies.”
This follows the CBI’s sobering research that confirms the current slump in private sector activity with consumer services showing a 41% fall in activity - the largest by any sector since February 2021.
Alpesh Paleja, lead economist at the CBI, said: “With the post-pandemic recovery severely challenged by continually strong cost pressures, private sector activity is grinding to a halt.
“Businesses are ordering earlier because unless they do, they won’t have anything to sell in six months’ time.”
This will effectively tie up cash for half the year that would otherwise be used to invest and recruit.
Martin McTague, chair of the Federation of Small Businesses, pointed out that while consumers had received help during the cost of living crisis, businesses had not.
He said: “This genuinely feels like a scary moment for many thousands of small businesses.
“The cost of a litre of petrol or diesel is just one very obvious example of the price pressures small businesses are experiencing. But it’s not just fuel - it's energy, raw materials, insurance, staffing costs, rents, components - it’s across the board.”
This is against a background of inflation rising to its highest level since January 2009 and expected to peak even higher at 11% in October, according to the Bank of England.
As well as dealing with the heat, the Summer is also an opportunity to take advantage of the downtime it brings and contemplate what the next move could be for your business.
And one of the best strategies to do this is to take advantage of some free professional advice.
We offer a free initial consultation to any business owner or director that will give them a better idea of what options they have to choose from, right now, to help their business recalibrate and restructure so that when the weather starts to cool and kids start to go back to schools, they will be in a stronger position than they are today.
All they have to do is get in touch first.
The Insolvency Service has published a new report on Company Voluntary Arrangements (CVAs) based on concerns received from landlords that they were being discriminated against in their use and implementation.
The report investigated the views of the commercial property sector and its representatives that CVAs were being used to target or disadvantage commercial landlords more than any other creditors especially in the retail and hospitality sectors.
The whole of the report can be found here and the main finding is that “landlords are, broadly, equitably treated compared to other classes of unsecured creditors” in CVAs.
The report served up several other key findings. These were:
Alternatives and Improvements
This is not to say that the CVA procedure is 100% perfect and couldn’t be improved. The report goes on to make some recommendations on this including:
The report says that “the CVA offers a flexible and cost-effective solution that bridges the gap between informal negotiations and formal insolvency procedures such as administration or liquidation.
“It provides an increased chance for the business to survive as a going concern, arguably a cornerstone of the UK’s rescue culture.”
The research showed that compromise was widespread with 747 companies across the retail, accommodation and hospitality industries reporting that they found their positions being compromised 93% of the time by a CVA between 2011 and 2020 inclusively.
The data was refined down further to include just companies defined as “large” which reduced the sample size to 82 which also saw the number that reported a compromise of interests fall to an average of 43% instead.
The report goes on to state that the level of future rent doesn’t tell the full story and that there may be additional areas of compromise relating to rent arrears, service charges and dilapidations that were unable to be assessed.
Chris Horner, insolvency director with BusinessRescueExpert, said: “While the use of CVAs has decreased somewhat over the past two years due to the unique circumstances and economic conditions and environment faced by many companies, it remains an important and viable tool to help otherwise viable businesses overcome problematic debt problems.
“The report shows that while some landlords might feel a little pressured to accept a CVA, on the whole they are still generally in a better position than unsecured creditors and will still benefit from a procedure being accepted than not.”
One of the key advantages of the insolvency industry is that it provides a range of appropriate tools for the situation. There is no “one size fits all” solution - which is a great advantage to any business facing financial difficulties.
If debts are too great to be repaid over a reasonable period of time then liquidation might be the best option for a business but increasingly for many, if debts can be combined into regular, manageable payments, then they can continue and ultimately thrive as a growing enterprise instead of closing.
But before any option should be selected in advance, the essential step is to get some impartial, expert advice first.
After arranging a free, initial consultation with one of our experienced advisors, business owners or directors will have a clearer understanding of the options available to them - what each one will do and how they can help their company towards their goals if they choose to follow them.
Then they can give all their energy and attention to what they do best - running their business instead.
Company strike off also known as dissolution, is the formal action of closing a company. It means that the company is formally closed or dissolved and removed from the companies house register.
There are actually two types of a strike off - voluntary and compulsory.
A voluntary strike off is where the company’s directors choose to dissolve the company, whereas a compulsory strike off is where a creditor or another party petitions to have the company struck off, usually as a result of non-payment of outstanding debts.
Why apply to strike off and dissolve a company
There are several reasons why directors might want to dissolve their business. These include:
Advantages and disadvantages
As with any insolvency procedure, there are pros and cons to it that should be considered before going any further.
Not every strike off is voluntary and there are hazards for directors of businesses that have a compulsory strike off carried out on their company.
These can include businesses that are still trading but don’t file their accounts on time with companies' houses and fail to respond to various warnings and reminders to do so.
The consequences can be severe including the directors potentially being made personally liable for debt, the company ceasing to exist as a legal entity, loss of assets and potential disqualification for up to 15 years.
How does a company strike off happen?
There are several steps involved in striking off a company but they are relatively straightforward.
While this process can be done by a director, some will use an insolvency practitioner to oversee the process for them to make sure that nothing is missed or that there are any loopholes which could be used to resurrect the company and give exposure to the directors at a later stage.
There are several reasons why a business might want or have to close and for a debt free company - a striking off can be the most efficient and effective way of closing the book on a company for the last time.
Depending on circumstances however, it might not be the most suitable and there might be other ways of achieving the same result that directors want.
Before pursuing a striking off or any other type of insolvency, get in touch and we’ll arrange a free initial consultation with one of our expert advisors.
They will let you know if this is the right path for you based on the circumstances of your company or suggest an effective alternative that might achieve the same or even better outcome. The only way to find out for sure is to make that call first.
As more evidence of bounce back loan fraud is uncovered by various sources, adding to the total amount to be recovered, a new report commissioned by the British Business Bank reveals that 45% of borrowers didn’t need the funds at the time - but still took advantage of the scheme to obtain them anyway.
The report also found that between 38% and 45% of respondents would not have sought any additional debt financing if the bounce back loans were not 100% guaranteed by the government.
Instead many used the funding to “become more resilient against future risk” rather than use it to fund immediate business expenditure or for legitimate business expenses such as staff wages, investment or to pay bills. Taking advantage of the cheap and relatively easily available loans became a viable option for many companies, even if they were not facing immediate threat.
The survey found that “one threat to the value for money of the schemes arose from the removal of measures to target the loan guarantees at businesses whose survival or stability was threatened by the Covid-19 pandemic.”
It said the findings suggested that “the removal of targeting measures has led to the public sector assuming the default risk of lending to a large number of businesses that may not have needed support to survive the pandemic.”
This came with the caveat that this meant that companies that did take out bounce back loans would be more likely to pay back the money than previously expected which would have a positive effect on default rates.
While previous official estimates have suggested that overall fraud and default losses could reach as much as £5.5 billion, the report said it was “still too early to fully assess the level of defaults and fraudulent claims.”
A spokesperson for the British Business Bank said: “Had lenders conducted their standard checks on such a volume of applications, it would have created an extensive backlog with smaller businesses waiting significantly longer for a loan during which period the survival of the business may have been at risk.”
Although the report stated there was “mixed evidence that the survival of many borrowers was contingent on the level of acceleration of lending decisions achieved” which could also raise questions on why more stringent checks weren’t applied to weed out fraud.
The report singled out one lender - Greensill Capital - for “irregularities noted in the lending decisions” based on allegations that they abused the lending scheme on behalf of larger companies.
Meg Hillier MP, who heads the Commons public accounts committee, said that chasing bounce back loan fraud is “a good way of spending taxpayer money” and worth the investment not only in order to claw back improperly obtained money but also as a “deterrent effect” to make criminals think twice before targeting any future government schemes.
The National Audit Office (NAO) continues to monitor the efforts of the various agencies tasked with recovering the outstanding bounce back loans that are due including the National Investigation Service (Natis).
Natis received £6 million from the government to fund their work, despite asking for £39 million over three years. The NAO have said they found this decision “baffling” given the government has already said that for every £1 invested in Natis, it would recover £8 for the taxpayer.
The agency has its hands full already - by October 2021 it had received more than 2,100 intelligence reports but had previously only been able to process approximately 50 a year.
More evidence is being uncovered about the scale of fraud that the generous bounce back loan offer attracted.
Recent research from a fraud data company, Synectics Solutions, based on the anonymous records of two major lending banks found that nearly half, 45%, of applications were from businesses that showed no evidence of trading at all, before or after March 2020. Additionally, 6% of cases showed evidence that raised “concerns the money may be syphoned off to the other companies”.
Another ongoing issue is the fragmented approach to fraud enforcement and who is responsible for investigating fraud. Currently there are at least 16 agencies, not including police forces, across government nominally responsible for detection and enforcement including the local and regional police forces, Natis, the National Crime Agency and the Insolvency Service.
After the resignation of Treasury minister Lord Agnew earlier this year in protest at perceived lack of action on fraud, the chancellor announced the creation of the Public Sector Fraud Authority with a budget of £25 million of new funding which will launch in July.
The data analytics experts and economic crime investigators at the authority are expected to help existing agencies rather than launch their own investigations and prosecutions.
Lord Agnew is keeping up the pressure to do more on recovering outstanding fraudulent bounce back loans. He is working with a group called Spotlight on Corruption which is currently taking the British Business Bank to a tribunal, which Lord Agnew said he would attend as an expert witness, that would compel it to release the names of all bounce back loan borrowers. The bank is refusing saying it would harm commercial interests.
He said: “This mishandling is going to remain in the public domain for years, with anyone associated with it shredded by a thousand humiliations.
“Someone with some courage in government needs to do the right thing and open up the data. It will force the pace and make things happen.”
The British Business Bank has also recently confirmed through a Freedom of Information request that the overall default rate on bounce back loan and CBILS repayments was just over 2%.
This was based on 2,000 of 97,000 loans already defaulting on repayments after the first few months of eligibility.
Further analysis showed that the construction industry had a default rate of 2.5% which was the highest sector with a total amount of defaults estimated to be at £350 million so far.
The BBB also estimated that without the bounce back loan scheme and CBILS then anywhere between 500,000 and 2.9 million jobs would have been lost.
They said that between 146,000 and 505,000 businesses - a third of the total number of borrowers - that took out bounce back loans would have failed without the support.
An additional 5,000 to 21,000 companies that took out CBILS loans aimed at larger companies would also have gone out of business.
Catherine Lewis La Torre, CEO of the British Business Bank, said: “The Covid-19 emergency loan schemes were designed to address a drastically altered economic landscape for smaller businesses as lockdowns took effect.
“This evaluation is the first indication of just how important those schemes were in saving livelihoods, businesses and hundreds of thousands of jobs, and we are proud to have played a vital role in their delivery.”
Chris Horner, insolvency director with BusinessRescueExpert, said: “The bounce back loan scheme was especially effective for some businesses in getting access to funds quickly that were essential to their survival.
“Unfortunately, with such a large scheme and with the size of the funds involved, it was always going to attract dishonest actors and it’s a shame that more wasn’t in place to detect them and make it harder for them to obtain money they weren’t entitled to.
“Now all businesses are having to make repayments, the economic landscape is a lot tougher than most would have imagined during lockdown and they will cause real difficulty to service for a lot of companies across many industrial sectors.
“Interest rates are up and approaching double figures for the first time since the early eighties, costs everywhere are rising, customers are being squeezed, weakening demand and for many a repayment might just be one bill too far.
“This is why we offer a free initial consultation to any business owner or director that is facing difficult choices right now to help them find a way through this difficult period for everybody.”
Hope is a great virtue to have when running a business but it’s not a sustainable strategy.
If you have time to get some professional advice on how to improve the prospects of your company in the next few months then use it wisely and get in touch with us.
An experienced advisor will quickly understand your situation and then work with you to identify the best options that you could have to make the necessary changes beginning right away.
You will then have the confidence to continue down this path - but only if you take the vital first step of making that call first.
We’ve talked about meta data points and big picture economic scenarios this week already with the question about the true state of the UK economy.
But an economy is made of hundreds of thousands of businesses, industries and trades and sometimes you can get a better understanding and idea of the reality by zooming in and looking at things a little closer.
And what could be more representative of Britain and the British economy than the good, old-fashioned fish and chip shop?
Well - it turns out it’s not a moment too soon to dive in because a lot of them might soon be financially underwater.
Andrew Crook, president of the fish and chip shop trade body, the National Federation of Fish Friers, thinks that up to 3,000 of his members could close this year because of the various problems facing them.
He said: “It really is a perfect storm and I think our members are definitely in trouble” - facing a twin threat of rising costs coupled with supply shortages.
One example is the price of sunflower oil that they use to fry the fish and the chips in.
It has gone from £30 for a 20-litre drum at the beginning of April to £44 (a 47% rise) last week. Additionally the price of potential substitute palm oil had risen from £14 for 20 litres to £29 with the NFFF thinking it could rise beyond £30 or even £40 in the next few weeks.
Crook continued: “Because half of our sunflower oil comes from Ukraine, the conflict is not only forcing the price up of sunflower oil but also palm oil too because everyone’s trying to buy as much as they can.”
This is also being impacted by a ban on palm oil exports being instigated by the Indonesian government who supply a fifth of the UK’s palm oil - forcing the price up even more due to scarcity.
The cost of other fish and chip shop staples have also risen with beef dripping doubling in price to £41 for 20 kilos while fish itself is “the most expensive it’s ever been”.
Crook says that shops will have to explore cheaper alternatives to traditional cod and haddock including hake as the former would be at a premium price.
40% of the industry’s cod and haddock supplies come from Russian waters so many shops have been looking to alternatives such as Icelandic and Norwegian fish instead to avoid an imminent UK-imposed 35% tariff on Russian caught fish. The price of a case of Icelandic cod is now £270 (£140 last year) mainly due to the stampede of buyers trying to secure their own supplies.
There are also increasing problems with potato supplies. The cost of fertiliser is increasing so farmers are increasing their prices to compensate and additionally there are fears going into the Summer.
Andrew Crooks said: “A big fear is the weather at the moment. We’re heading towards a drought, just as the potatoes are growing. If we don’t get rain and they don’t grow that could be a big worry as well. So we’re just going to roll with the punches.
“It’s definitely going to be tough. My business is going to struggle to get through because consumers seem to just want to go on price. I’ve been in business for 22 years so you kind of get a thick skin, but if you don’t you want to cry.
“It’s more than just a job. For many of us, we’ve taken on family businesses. I’m second generation in the business and you don’t want it failing on your watch. If I were a panicker, I’d be very scared.”
These views are echoed by Martin McTague, national chair of the Federation of Small Businesses (FSB). He said: “An increase in the cost of cooking oil, and a decrease in its availability, is bad news for small restaurants and cafes, especially ones which use a lot of oil, like fish and chip shops.
“Switching suppliers is unlikely to help, as the issue is widespread, while switching to a substitute product may not be possible, due to price, different performance of the oil at high temperatures, or other concerns.”
This chimes with the FSB’s own research for Q1 which found that 90% of businesses in the accommodation and food service sector had experienced increased costs over the past three months with 40% reporting a “significant” increase.
Inflation is also being brought to bear across the whole industry - not just affecting the shops but also the suppliers and their fishing fleets including fuel for the boats.
Evidence is growing that operators all over the UK coast are making hard decisions about when or if to head out to sea as the higher prices received for their catch are rapidly being outstripped by the cost of the fuel.
Barrie Deas, chief executive of the National Federation of Fishermen’s Organisations (NFFO) said: “For certain methods of fishing, it’s reaching that kind of tipping point where fuel costs are maybe 50% or 60% of the operational cost of the trip.
“When you reach that tipping point, it’s just a question mark whether it’s viable to continue fishing. Boats are considering whether they have to tie up now for a while.”
The NFFO are asking for increased government support pointing out that fuel subsidies have been given in recent weeks to French and Spanish fishermen by their governments. Deas continued: “This creates an uneven playing field. If you don’t catch and land fish, you don’t have a supply chain.”
A spokesperson for the Department of Environment, Food and Rural Affairs said: “Like many sectors, the fishing industry is facing challenges as a result of global fuel prices.
“Marine voyages relief provides eligible vessels with 100% relief on their fuel duty costs, and we continue to engage with the industry to discuss ongoing challenges and potential mitigations.”
From a pure monetary value the fishing, aquaculture and processing sector represents 0.1% of the UK economy contributing £1.4 billion but its symbolic importance and value to the coastal communities around the UK from Scotland, the North East and Cornwall that depend on the fishing industry is a lot greater.
There are certain staples and touchstones throughout life that should signal danger if they are under threat.
Fish and chip shops are just one example. They escaped rationing restrictions during the second World War because they were so important to national morale and the fact that so many are facing difficulties now should be a big wake up call not just to the authorities but to business owners and directors themselves.
Even if their business is not in hospitality, it’s important to consider that if it can happen to something like the fish and chip industry, then it could happen to them too.
We offer a free initial consultation to help anybody who wants to strengthen their business before tough times come along - or to join financial struggles if they’re in danger of succumbing to debts.
So If you’re a fish and chip shop owner needing help then we can let you know what options are available to you, right now, to help you keep the fryers frying and the country well fed.
Or if you can’t see a way forward for your business and are looking for a way to close efficiently then we can help you manage the process in the most orderly way to let you move on with your life and career even sooner.
John Tuld: “Let me tell you something, Mr Sullivan. Do you care to know why I’m in this chair with you all? I mean, why I earn the big bucks?”
Peter Sullivan: “Yes”
John Tuld: “I’m here for one reason and one reason alone. I’m here to guess what the music might do a week, a month, a year from now. That’s it. Nothing more. And standing here tonight, I’m afraid that I don’t hear a thing. Just…silence.”
There have been various pieces of data and reports released recently that taken individually all contain negative news for the overall UK economy - that it might “grind to a halt” before shrinking in the second half of the year.
But analysed collectively they indicate a bigger and more worrying conclusion - that instead of slowing, the economic music might have already stopped and to all intents and purposes the UK is already in a recession, or its SMEs are already experiencing the effects of being in one.
Firstly, the British Chambers of Commerce (BCC) released their forecasts for the UK economy over the next couple of years. They predict:-
Alex Veitch, director of policy at the BCC said: “The latest forecast indicates that the headwinds facing the UK economy show little sign of reducing with continued inflationary pressures and sluggish growth.
“The war in Ukraine came just as the UK was beginning a Covid recovery; placing a further squeeze on business profitability.
“The forecast drop in business investment is especially concerning. It is vital that urgent action is taken here, and we are having constructive conversations with the government about its review of capital allowances and other policies to incentivise business investment.
“With inflation forecast to race ahead of wages, we are concerned about a dip in consumer spending which would further impact businesses and hamper growth. We forecast that if trends continue, inflation will only return to the Bank of England’s target rate at the end of 2024, implying a prolonged period of difficulty for the UK.
“Against this backdrop, the government must put in place stable and supportive policies that help businesses pull the UK out of this economic quagmire. Firms must be given confidence to invest, only then can they drive the growth the economy so desperately needs.”
This follows from a report from the Organisation for Economic Co-operation and Development (OECD) that also thinks that the UK will go from the second fastest growing G7 economy to the slowest next year.
A tight labour market of low unemployment and a high demand for workers coupled with below inflation pay rises will mean that consumers will have less disposable income to spend and the longer inflation remains high and growing, the longer this will be a problem for businesses that are trying to attract this spending.
The latest data from the Office for National Statistics (ONS)also further illustrates the growing threat
The ONS found that there was a 0.3% decline in GDP in April which is the second consecutive monthly reduction after a decline of 0.1% recorded in March.
Just as significantly, there were reductions across the service, production and construction sectors for the first time since January 2021.
The ONS findings showed that the significant reduction in NHS Test and Trace activity was mostly responsible for the fall in the services sector with a decrease of 5.6% recorded in human health and social work.
Production output fell by 0.6% which was further dragged down by a 1% reduction in manufacturing as businesses have had to deal with both the impact of price increases and ongoing supply chain shortages.
Construction also saw a fall of 0.4% in April despite a stronger March when there was significant maintenance and repair activity due to the series of damaging storms that hit the country in February.
The data also showed that average wages in the UK were falling at the fastest rate for more than a decade - 2.2% in the three months up to April - as annual pay growth failed to keep up with the rising cost of living.
Interestingly, despite the number of job vacancies reaching a new record high of 1.3 million, the unemployment rate actually increased last month slightly by 0.1% to 3.8% although this is still historically a very low rate.
What does this mean for companies?
We’ve already seen an increase in the number of company insolvencies this year with April’s total of 2,114 corporate insolvencies in England and Wales being the highest recorded in over two years.
Chris Horner, insolvency director with BusinessRescueExpert, thinks that the only argument about whether there will be a recession or not is actually about when rather than if.
He said: “The government would point to various bright spots in the data - and there are some - such as historically low unemployment and that actual growth is forecast over the next three years, not an overall contraction in any year.
“But this doesn’t mean that a recession - defined as two consecutive quarters of negative growth - isn’t going to happen. The chances of this are probably increasing as the underlying factors - cost of living, inflation, interest rates are all rising simultaneously.
“The housing market is cooling, the construction sector is slowing and consumer confidence is flat at best.
“We’re also hearing this odd but important word “stagflation” being mentioned. This is where weak economic growth is coupled with high inflation and can be enormously damaging for any economy trying to deal with it.
“If the current challenging environment continues - the war in the Ukraine, high food and energy inflation and potential for further supply chain disruptions and price rises if trade relations with the EU continue to deteriorate - then the most realistic scenario is also a pessimistic one for most businesses.”
The music might not have stopped but the tempo is definitely slowing down.
And if it does stop, which is looking increasingly more likely than not, then a lot of businesses can find themselves without a seat when they’ll need support most.
If you’re a tuned-in business owner or director then you can use this time to your advantage by booking a free consultation with one of our expert advisors at a convenient time for you.
They will explore every option you have based on your ambitions for your company - whether it’s to strengthen and protect it through turbulent times or to close down and begin again with a minimum of mess and stress.
The earlier you make the decision to get in touch, the sooner we can help you before all anyone can hear is the sound of silence.