01/03/12 | November 2011 Bulletin
Time to forget the statistics and get on with Business
The UK Government’s Insolvency Service released figures on Friday showing that company insolvencies were up by 0.1% on the previous quarter and up by 6.5% on the same quarter a year ago. That sounds like bad news, but what does it mean? Q3 GDP figures showed that UK output increased by 0.5% (up from 0.2% the previous quarter). That sounds like good news, but is it? Unemployment is now at 2.57m or 8.1%. CPI Inflation is 5.2%. Good or bad?
All of these background economic figures are irrelevant to individual businesses – they describe the general business environment but do not apply equally to all businesses nor to all sectors. The fact that T J Hughes went bust leaving £339m of creditors is only relevant if your company was one of the creditors (or if one of your customers was one of the creditors and is now struggling to pay you). Similarly, the overall increase in GDP is less relevant than how your own sales and order book are looking.
The point is, that there are winners and losers in all sectors regardless of the background statistics. Companies are succeeding in retail, in construction, in manufacturing. Companies are growing their exports and finding new markets even in these generally difficult times.
However, there is frequent mention of uncertainty and many companies lack the belief and confidence to invest in the future. This is perhaps where the latest Insolvency figures come in. Not only are there a growing number of companies going bust, but many of those insolvencies are unpredictable – just last week, Parry Bowen Ltd went into administration. Not a national name, but a construction contractor established in 1979 with turnover of £23m in the accounting period ended 30 June 2010. Those accounts showed a £3.6m net worth on the balance sheet, £2m in cash and £3.6m working capital. They looked a good credit risk, right up until they went into administration. If you didn’t give credit to companies like Parry Bowen, then there would be a lot of companies that you wouldn’t give credit to!
Credit insurance can’t stop your customers going bust, but it can give you confidence to trade and it can give you the security to continue to provide goods and services to companies like Parry Bowen Ltd – plus the security of insurance cover in the event that such customers go bust.