CM December DECEMBER 2018

EXCLUSIVE REPORT
AUTHOR – Nalanda Matia
recession (2010-11) era while for sectors like
Personal Services, Construction or Machinery
Manufacturing have not seen any significant
reduction in the number of liquidations since
the post-recession period. These latter group
of industry segments may be suffering on the
stability perspective and it needs to be seen
whether or not policies could be put in place to
help businesses continue on the path of stable
and sustainable growth. Overall, the number of
businesses that closed their doors in the past year
has declined by a little over 20 percent. However,
on the whole, the volatility in change of business
failures has declined considerably, businesses
within the UK economy have slowly gained
stability over time, attaining maximum stability
around late 2015 through mid 2017. Business
liquidations seemed to take an upturn on the
annual basis again in the second half of 2017,
but have been steadily declining, achieving the
highest decline since Q1 2016 during the current
quarter – but there are pockets of concern that
need further attention.
A potent leading indicator of business
stability is a business’ payment performance
– how promptly a business has been paying its
creditors and/or suppliers. The 12-month view
of the percentage of prompt payments made
by UK businesses on an average shows that the
metric has been quite stable over this period of
time. For the past year, the percentage of prompt
payments for these businesses have hovered
approximately around the 30 percent mark,
with small improvements around early 2018 and
stabilising around 31 percent currently after a
slight drop earlier in the quarter. This number
Nalanda Matia
In conclusion,
the overall health
of the business
population in
the UK seems to
be fairly robust,
with pockets of
concern present
in some major
industries.
varies considerably for business segments – and
have a strong correlation with business size.
The smallest businesses (by employee counts)
seem to make the highest percentage of prompt
payments – over 35 percent of their account
payables are paid promptly within terms. This
percentage declines systematically, dropping to
14 percent of prompt payments for mid-sized
businesses with 101-250 employees on their
payroll. The percentage of prompt payments for
the largest businesses in the country with more
than 1,000 people under their employ pay only
about six percent of their accounts payable in a
prompt manner. This trend is not only true for
the current recording period, but holds true for
all historical periods as well and clearly points to
the position of confidence that large businesses
enjoy by virtue of their market power and possibly
brand name in the industry. This also brings
to the forefront the plight of small businesses,
that in spite of their incessant cash-constrained
state, they do not have the bargaining power to
attain more favourable terms for their accounts
payable and are obligated to pay a relatively
higher percentage of these in a prompt manner.
This trend can best be addressed by regional and
local authorities by providing special financing
programs for small businesses in need to help
them maintain better payment terms as well as
gain stability and reduced financial stress.
As for all other metrics reviewed above,
the percentage of prompt payments vary
considerably by industry as well. This variation
is usually attributed to the norms set within
an industry which vary considerably from
industry to industry. As can be seen from the
The Recognised Standard / www.cicm.com / December 2018 / PAGE 43
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