ICSM Business Membership Group: fighting late and non-payment – Dobbies in trouble, Spirit Airlines for the ‘car wash’, Volocopter problems and EV sales flop due to net zero

By Harry Mottram: With the news that M&S and Kingfisher are hoping to snap up Homebase stores after the DIY giant hit the skids, we take a quick look at some recent problems for businesses during the cost of living crisis.

Garden centres pruned

First up is Dobbies – which if you don’t live in an area where one of their 77 garden centres are located you may not be aware of them. The struggling retail centres based around the homes and gardens sector are to shut 17 of their outlets to cut costs. Writing for BBC Gloucestershire Maisie Lillywhite reported: “The company says it is putting in place a restructuring plan to address ‘historically uneconomical rent costs and ensure a return to sustainable profitability’.”

Some of the 17 that are to close are in Gloucester, Altrincham, Gosforth, Huntingdon, King's Lynn, Pennine and Stratford-upon-Avon – suggesting the situation is serious as the spring bank holiday weekends and the run up to Christmas as some of the sector’s busiest times.

The BBC noted that the garden centre chain fell to a £105.2 million pre-tax loss in the year leading up to March 2023, against a £7 million loss a year prior. The closures will affect 465 employees, including 82 full-time workers, of the company’s roughly 3,600 strong workforce. And interestingly Dobbies added there will be "no impact" to suppliers.

Airline turbulence

The travel correspondent for The Independent newspaper Simon Calder has reported on the USA budget airline Spirit Airlines going into administration. In America this is called Chapter 11 which allows an insolvent firm to be cleansed of its debt problems by restructuring loans and given protection from bankruptcy. Known as the ‘carwash’ the process allows firms to emerge at the end of the legal process with a clean bill of health – sometimes several months later.

Simon Calder noted: “Florida-based Spirit is the biggest ultra-low-cost carrier (ULCC) in the US. It has a main base in Fort Lauderdale, together with crew bases at many of the biggest hubs in America: Atlanta, Chicago O’Hare, Dallas-Fort Worth, Detroit, Houston Intercontinental, Las Vegas, Miami, New York Newark and Orlando. Its all-Airbus network extends into the Caribbean and northern Latin America.”

Apart from thousands of British customers the business is also supplied by a range of international businesses who must now wait to see when they will be paid. Usually Chapter 11 means any invoices that are unpaid will be settled over a longer period of time. Not ideal – but better than being written off. For customers and staff Chapter 11 should mean business as usual until any restructuring takes place which could see redundancies and some routes cut.

Stopper chopper

The German electric powered two seater helicopter taxis known as Volocopters have more or less been grounded for lack of cash and customers. The firm VoloCity was founded to ferry people around the Paris Olympics but the demo flights didn’t take off. The problem was a lack of cash. Negotiations to borrow £83m from the government collapsed earlier this year leaving the firm on the brink of failure. Further negotiations are planned with the Chinese firm Geely but the sticking point is the far east outfit wants to take control of VoloCity.

The problems of vertical take-off taxis aren’t just about money there are delays in getting approval from aviation regulators in an increasingly congested airspaces in urban areas. There’s also the need to mass produce these magnificent flying machines in order to bring the costs down. That all costs money despite the attraction that electric powered aircraft are much quite than conventional ones.

A jet powered vertical take-off aircraft taxi made by Germany’s Lilium looked likely to do well with hundreds of orders. Until the cash ran out at the manufacturing stage and a Government bail-out failed to materialize and the firm went bust. In Britain the CityAirbus aircraft from Vertical Aerospace also ran out of cash and was taken over by an American company proving how difficult it is to get the eVTOL products off the ground.

Unwanted e-cars

The sale of new petrol and diesel cars in the UK will end in 2030, although many in the motor trade believe this is unlikely to happen so soon. Partly due to a lack of infrastructure for the e-cars and partly due to the public not yet embracing the new electric alternatives in any great numbers. Sales of e-cars have fallen this autumn suggesting that already the market for them has reached a plateau leading to manufacturers revising plans for mass production. Vauxhall are closing their Luton van-making factory while Ford is cutting hundreds of jobs as they experience less demand for electric vehicles.

The industry wants more incentives for customers to buy e-cars as there is a shall we say elephant in the room that is preventing the 2030 deadline becoming reality: it’s called net zero. The UK's zero emissions rules means that car makers have to sell 24% of their output powered by batteries and for each car sold over that limit they are fined £15,000.

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ICSM, The Exchange, Express Park, Bristol Road, Bridgwater, Somerset TA6 4RR. Tel: 0844 854 1850. www.icsmcredit.com. Ian.carrotte@icsmcredit.com