News shorts: Capita in fight to survive; double dip recession prediction; and watch out as the banks return to their bad habits of imposing high interest rates, bank charges and worse

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Double dip

Ian Carrotte of ICSM Credit has warned there is a possibility of a double-dip recession.

He said: “We have seen a huge drop in the economy this year with a recovery underway this summer. With the end of furlough, the various lock downs and the traditional fortnight shut down at Christmas I can foresee a second dip in January.”

UK economist Paul Dales of Capital Economics told the Daily Mail that the economy was taking “a worrying turn after purchasing managers.” He said: “The trajectory is worrying and suggests Covid restrictions in September are squeezing activity. It's not looking good.”

This year Q1 was down 2.2% and Q2 down by 20.4% while there were double dip recessions in 1973-1975 and again 2008-09 with the credit crunch and the banking crisis.

Capita flog off assets

Francesca Washtell for the Daily Mail has reported on the continuing problems of Government contractor Capita. The firm has been likened to Carillion which memorably crashed owing creditors millions of pounds.

She reported: “Capita may be forced to sell prestigious property developer at a loss following allegations that its bosses 'destroyed' the company. The outsourcing firm bought GL Hearn in a deal worth up to £30m in 2015. GL Hearn is one of half a dozen or so businesses Capita intends to offload to raise £200m. Capita bought GL Hearn, which has worked on the regeneration of Swansea city centre and the expansion of Luton Airport, in a deal worth up to £30m in 2015.”

The firm originally thought that buying GL Hearn would boost Capita’s growth but it is now thought the firm will fail to recoup its investment said Francesca Washtell.

She said: “GL Hearn is one of half a dozen or so businesses Capita intends to offload to raise £200m – including its events and translation divisions. The Mail understands that the sales process has been put on hold temporarily – but the businesses are still earmarked for disposal. Alarm bells began ringing at GL Hearn last year when a string of senior employees, including the planning director and head of strategic planning, left for rival firms.”

Ian Carrotte said ever since the Carillion disaster that left many suppliers out of pocket rumours have persisted about the viability of Capita. He said three years ago the Labour Party cited Capita for paying up to 84 days following a report by Experian.

“On their website they say they pay between 7-30 days,” he said, “which contrasts with 84 days. As the Daily Mail put it – alarm bells are ringing. Be very careful is my advice to potential suppliers if you suddenly get a big order from them. Before the pandemic they recorded a £62m loss in 2019.”

Banks charging interest

Ian Carrotte has lashed out at the main lending banks after members of ICSM Credit reported they were expected to make personal guarantees on covid-related loans.

He said: “Not only are the banks demanding a guarantee such as the family home to secure a loan they are also upping the interest rates up to 8% in some cases. Bounce back loans are guaranteed by the Government at 80% of the original sum. A lot of businesses have asked their banks to extend the loan or increase it as this year has been difficult. Instead of helping SMEs the banks are hindering the situation.”

Another old practice seems likely to come back – bank charges for basic services. The HSBC is considering charging for products such as current accounts, which are free to UK customers following a 35% drop in profits. The bank is slashing staff numbers and said it is restructuring.

“That’s just what businesses don’t want to hear,” said Ian Carrotte, “with everything else that is hitting business.”

About ICSM Credit

ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel - while at the moment there's a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach - ask for details from Paul.

For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.

To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com

For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk