Ian Carrotte of ICSM Credit: it's a national scandal that suppliers are owed £1.86bn in unpaid invoices in 2020
The CEO of ICSM Credit, one or the UK's leading credit inteligence groups dedicated to minimising business losses through insolvencies or the bad practice of late payment has highlighted a report that firms in the supply chain have been left out of pocket due to company collapses.
"For me the business secretary should have insolvencies at the top of his agenda," he said. "This year the number of firms going to the wall has left their suppliers with unpaid bills which for many will send them under. Business only works when there is trust and at the moment trust has gone."
Mark Halstead of Red Flag
Special report
In a report published this week by industry research specialist Red Flag Alert, companies are set to write off £1.86 billion in unpaid invoices this year.
Red Flag Alert’s most recent ‘Write Off Report’ data from 13 November 2020 shows total levels of written off business debt in the UK have risen by 1% so far this year, increasing from £1.84bn to £1.86bn.
Managing Director of Red Flag Alert, Mark Halstead, said: “1% growth in insolvent debt can seem like a very marginal change. However, when we consider the Government’s COVID-19 measures including the Corporate Insolvency and Governance Act as well as loans, grants and salary support, levels of bad debt this year should have really declined.
“Government has provided struggling businesses with breathing space and financial support that was meant to avoid bad debt and to keep cash flowing throughout supply chains.”
Whilst the Write Off Report data does show a decline in the number of company insolvencies in 2020, it shows the average debt per company going out of business has increased by 7%. On average, insolvent businesses now leave behind £205,000 in unpaid invoices.
Mark Halstead added: “Insolvencies vary significantly in value and it’s the ripple-effect that can prove so damaging, as it literally sucks serious amounts of revenue out of supply chains. Earlier this year we reviewed the administration of construction company Sanderson Contracts, which went into administration leaving debts of £10.3m and 17 suppliers at serious risk of failure.”
The retail sector has seen one of the largest rises in written off debt in 2020, with an increase of 47.8% from £59.3m at the end of 2019 to £87.6m in mid-November.
Other noticeable rises so far this year in insolvent debt include the construction sector, where write offs have risen by £31million to £283million, while hotels have seen write offs treble from £4.3m to £13.8m. The travel and tourism sector has seen a similar change, with insolvent debt growing from £5.2m to £13.4m.
Mark Halstead added: “The real concern for some of the sectors that have seen significant rises in written off debt is that separate Government ONS* data identifies a trend of businesses pausing trading, with no immediate sign of recommencing work. The impact of these failing companies won’t be seen until early next year, when a number of other factors come into play and will make it even more challenging for struggling companies to survive.
“Government COVID-19 support is shifting from grants and loans, and measures protecting businesses from insolvencies to rebuilding the economy. At the same time, the completion of the Brexit transition draws increasingly closer, bringing new operational complexities and costs.
“Written off debt will grow significantly and repeatedly in the next six to 12 months. Companies need to ensure they are protecting themselves against an ever increasing risk of customers defaulting on outstanding payments.”
*The ONS, Business Impacts of COVID-19 survey, period 16th November to 29th November 2020, shows 9.7% of construction companies and 27.3% of accommodation and food services companies have ceased trading and do not intend to restart in the next two weeks.
Models and artists left out
Ian Carrotte of ICSM Credit said the statistics backed up the findings of ICSM Credit. He said that members had reported concerns over firms in the hospitality and retail sectors failing to pay their invoices on time. And ICSM Credit's debt recovery service had bad been very busy.
He said from models to artists and actors were amongst those left with nothing. "Freelancers are the life blood of the economy - they are free spirits but also self-starters who fuel business and yet they have been left with nothing," he said.
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