Credit Management September 2018

CMNEWS
A round-up of news stories from the
world of consumer and commercial credit
Written by – Sean Feast and Alex Simmons
One in four UK
companies hit by
domino effect
OVER a quarter (26 percent) of UK
companies have suffered a hit
to their finances following the
insolvency of a customer, supplier
or debtor in the last six months, according
to research from R3.
The research found the financial impact
of the insolvency of another business was
described as ‘very negative’ by one in ten UK
companies (ten percent), and as ‘somewhat
negative’ by 16 percent of respondents.
The figures are evidence of the so-called
‘domino effect’, where one company’s
insolvency will increase the insolvency risk
for others.
In Q1 2018, following a spate of high
profile insolvencies such as Carillion and
Toys R Us, underlying insolvencies climbed
13 percent from the previous quarter.
Andrew Tate, spokesperson for R3, says
no business exists in isolation, and every
headline-grabbing corporate insolvency
will have consequences for numerous other
enterprises’: “In the worst-case scenario, the
loss of a vital business relationship can lead
to a company’s own insolvency in turn – the
‘domino effect’.”
“After the news of the Carillion
liquidation broke, for example, our
members reported an immediate
upsurge in requests for advice from
companies with links to Carillion.”
Construction businesses
were the most likely to say the
insolvency of another firm had a
negative impact on their finances
in the last six months, with almost
half (47 percent) reporting a hit.
Wholesale (35 percent) and transport (33
percent) were the next-most affected sectors.
Two-fifths (38 percent) of firms with
turnover of between £5 million-£24.9 million
reported a negative impact, while the levels
for smaller companies (up to £4.9 million
turnover) were just under a quarter (24
percent), and 30 percent for larger companies
(with turnover of £25 million+).
One in ten (11 percent) of firms said the
insolvency of a counterparty had not had a
material impact on their business, with just
under half (47 percent) reporting that none
of their suppliers, customers or debtors had
entered an insolvency procedure in the past
year. r3.org.uk
In the worst-case
scenario, the loss of a vital
business relationship can
lead to a company’s own
insolvency in turn – the
‘domino effect.
> GOVERNMENT APPOINTS NEW
SMALL BUSINESS MINISTER
KELLY Tolhurst, MP for Rochester and Strood,
has been named as the Government’s new Small
Business Minister following the shock resignation
of Andrew Griffiths after a Sunday tabloid expose.
Tolhurst has been an MP since 2015 and prior
to joining Parliament she ran Tolhurst Associates,
a marine survey business, with her father after
a career in marketing. In government she was
previously an assistant whip and voted to remain
in the Brexit referendum.
Philip King, Chief Executive FCICM, of the CICM,
welcomed the appointment: “We look forward to
working closely with Kelly in our shared desire to
support the small business community and the
vital role they play in the UK economy.”
gov.uk
The Recognised Standard / www.cicm.com / September 2018 / PAGE 5