Stuart Robb, director at Leonard Curtis Business Solutions Group, urges business owners not to place pride before financial failure as he comments on the rise of the number of failures of UK companies.
The number of failures of UK companies has increased by almost a third in the second quarter of this year, compared with the same period a year ago – a rise of 30 per cent to 4,827, according to a new report.
UK businesses in distress
Large company failures and the bad debt owed to the suppliers they leave behind is being attributed to this startling soar, which is up by a staggering 307 per cent to £2bn compared to the same period last year. The so-called ‘domino effect’ of company insolvency – most prominently affecting the high street as well as the construction industry – has hit hard those contractors, sub-contractors and wider network that have supported and been supported by those companies that have failed.
The rapidity of these collapses has also impacted greatly on the supply chain, with small to mid-sized suppliers being less well equipped to weather the sudden storm of financial insecurity and bad debt.
The ambition remains
Whilst the overall outlook is concerning, there are some positive indicators. Despite the high business failure rates, the number of active companies across the 12 business sectors analysed in the study has risen by 14.7 per cent over the last 12 months to a total of 3.3m. Employment is also up by 13.1 per cent to approximately 29.2m employees, highlighting a clear commitment and focus on growth, increased productivity and output.
Supporting SME success
Also, encouragingly, business births outnumbered deaths by some 85,000 over the same period, but for more SMEs to succeed and thrive, they must be encouraged to seek support sooner.
Better still, they should have ongoing partnerships with experts who can provide the often necessary specialist and non-core skills that their business needs at every stage of its lifecycle. Indeed, it’s the savviest SME owners out there – with the most robust commercial strategies in place – who have developed a trusted network of professional contacts with whom they’re not afraid to share the health of their businesses.
Over the last 23 years, we have provided support and positive strategic advice to thousands of SMEs – with the intention of avoiding insolvency and supporting growth. The fact that it offers a multi-disciplinary approach – and assesses each case individually to develop the best solution from its extensive portfolio of services – makes its rescue and recovery offering so strong.
Turnaround when faced with financial failure
As a result, in the last three years alone LCBSG has safeguarded over 14,000 jobs, secured approval of over 150 Time to Pay (TTP) proposals – repaying more than £26m to HMRC and raising in excess of £250m in finance.
Of those companies that could not be saved, many could have avoided entering the formal insolvency process had they only held up their hands and asked for help earlier.
Overcome the problems of pride and seek specialist support
When we’re first approached by business owners and their advisors, nine times out of ten we have to help them overcome their psychological hurdles to early engagement. We must remember that distress doesn’t always mean disaster and we’re always quick to demonstrate that we’re not the ‘undertaker in waiting’ as is so often misconceived.
It helps tremendously that we place much greater focus on restructuring, refinancing and turning businesses around. As a Group, we’re in a very strong position to prevent failures from happening in the first place and we’re delighted to say that clients are becoming increasingly aware of this. However, we have a lot more work to do.
According to industry body R3, for every company that fails, a further two have been turned around. Leonard Curtis is committed to making sure its clients don’t add to the more negative of these statistics.
Denial is dangerous
From our experience, this sense of shame experienced by UK business owners leads to unnecessary insolvencies. Most of them are at varying levels of denial when they come to us. One of the biggest challenges is working with them to overcome the stigma associated with seeking advice when cash is in short supply.
So despite the UK scoring third globally in an OECD ranking of the number of start-ups created, it’s this misplaced pride that prevents us from making the top ten when it comes to profitable business growth. Although Brits enjoy an enviable entrepreneurship and positivity, it seems that we don’t know what to do or where to go when we are in difficulty. Or we simply daren’t ask.
From 15 offices across the UK, LCBSG’s national team of restructuring specialists, lawyers and financiersprovide positive strategic advice and solutions to SME owners and their advisers – enable them to retain control of their businesses and their futures.