Insolvency arises when a business can no longer meet their financial obligations to their lenders as debts become overdue. It can arise from poor cash management, a reduction in cash inflow, or an increase in expenses. According to a report by UK Finance based on 26 IF/ABL members, (supporting approx 25,00 end clients), last month saw the total number of UK company insolvencies up 50% on April 23 with a notable increases in CVA’s and administrations. Registered company insolvencies in May were 2552, compared to Aprils 1688. This is also 39.8% higher compared to the same time in 2022.
This is a trend that has continued since the start of the year. The increase in company insolvencies overall is undeniably a reflection of the extraordinary circumstances that the world has experienced over the last few years. The current challenging economic climate, coupled with predicted low domestic growth is a major concern for companies in the UK currently.
A recent case highlighting Henry Construction demonstrates the crushing impact it has on the supply chain with hundreds of sub-contractors hit and rumoured trade creditors of £50m. Last year Henry reported revenue had topped £400m for the first time generating a £14m pre-tax profit, compared to just five years ago when turnover stood at £111m. Henry had at least 30 jobs on the go where it was main contractor. Many were running months late as payment disputes slowed progress on projects.
If your recruitment agency works within the contract market supplying temporary workers in any capacity at all, then debt is unavoidable.
How that debt is managed is vital.
Having a lender that is able to get credit where most others can’t, may well be an important tool for your toolkit going forward; Quba Solutions have a policy with some of the most senior underwriters meaning we tend to be able to secure the required credit for our clients – and in the cases where it isn’t possible, we are able to offer help and advice on why. We had zero exposure to Henry Construction directly at the point they entered into administration
The importance of having a recruitment finance provider who knows what they’re doing is more vital than ever.
The dangers of bad advice are starkly brought to our attention by our clients on a regular basis – there are providers out there offering finance without cover just because of a misunderstanding of certain clauses. It’s a dangerous game to play and not one that you should ever join in with!
We know the game, we know the market.
We don’t want anyone overtrading, but we understand that it’s an important option for recruiters who need the flexibility to make the most of their own business.
Protect your business from insolvency and failure by making sure you’re supported by finance and credit providers that know your market inside and out and can help you navigate the stormier seas – not just the fair weather. To see more of what Quba and the DynamiQ platform can do watch our introductory video or book a call with one of our funding professionals now.