Editor: John Arnold. E-mail jarnold@creditman.co.uk
Pat Williams. E-mail pwilliams@creditman.co.uk
Site: Business Credit Management UK
URL: http://www.creditman.co.uk
Issue: Vol 5 Issue 42
Dated: 11 November 2001
Welcome to the Business Credit News UK.
In this weeks edition you will find the following topics.
DEBT SURVEY 2001 - NOW YOU CAN ORDER AND PAY ONLINE
The first comprehensive study of the UK Debt Collection Industry published by the Credit Services Association (CSA) with the Credit Management Research Centre at Leeds University Business School can now be ordered and paid for by credit card online at http://www.creditman.co.uk/referenc/debtsurvey.html
The cost of the Debt Survey 2001 is £300 and postage is included in the price. Overseas Orders are welcomed with payment by credit card.
UKINTEREST RATES CUT
The CBI applauded the Bank of England's half-point cut in interest rates.
It led the campaign for a reduction after publishing a survey showing many firms experiencing the worst trading conditions for twenty years.
Digby Jones, CBI Director-General, said: "This was the decisive move that business wanted to give our economy a much-needed shot in the arm.
"The global slowdown has put UK manufacturing in recession and is now spreading to the service sector. We are seeing early signs that strong growth in consumer spending has slowed and that consumer confidence is flagging.
"With no danger from inflation, this cut will help by maintaining consumer confidence and reducing the cost of company borrowing. It should not be seen as the end of the road. The Bank should stand ready to cut again if conditions continue to deteriorate."
MPC TAKES BOLD STEP TO SHORE UP ECONOMY - CHAMBERS
Reacting to the Bank of England's decision to cut interest rates to 4.00 per cent, Ian Fletcher, Chief Economist at the British Chambers of Commerce said:
“We welcome this clear message that the Bank is prepared to do all within its powers to ensure the UK economy gets over what should be temporary difficulties. The consumer-side of the economy appears to be bearing up well and there is no reason why confidence and activity should not bounce back.
“Recession is not inevitability, but the collective decision of us all, and we support the Government's message to carry on spending. Interest rate cuts, however, will only superficially help manufacturing and we seek appropriate support for the troubled sector in the Chancellor's forthcoming Pre-Budget report.”
SMALL BUSINESS REACTION TO INTEREST RATE CUT
Speaking on behalf of business borrowers, the FSB welcomed the decision by the Monetary Policy Committee to reduce the base rate by half of one per cent from 4.5 per cent to a forty year low of 4 per cent.
John Walker, FSB Policy Chairman said, "this should reduce small business repayments to the banks by £200 million."
The FSB, being mindful of members who have deposits, is undertaking research into the impact of historically low interest rates on business savers.
BRITISH BUSINESSES MUST CONSIDER SAILING BEYOND OUR EUROPEAN SHORES TO MAKE A HAUL
Are UK business owners failing to capitalise on the full potential of the global marketplace? A survey conducted by leading business and financial advisers, Grant Thornton, reveals that 75% of UK business owners with a turnover of up to around £100 million see Western Europe as the most important foreign market. Meanwhile other regions such as Asia Pacific and South America were viewed as important by only 3% and 1% respectively, indicating that the market potential of these areas is not being fully exploited.
Explaining why UK companies have been slow to penetrate global markets, the study reveals the principal challenges that companies face when attempting to gain a foothold on foreign soil. A third of respondents cited the drain on management time as a key barrier to success while one in five felt constrained by a lack of market knowledge. Around 15% were concerned by the cost of overseas business development and one in ten were hampered by the volatility of exchange rates.
But Grant Thornton warns that as confidence in the UK economy wanes, it may be an ideal time to extend your markets beyond European shores and seek global opportunities.
However in order to do this successfully, companies need to have a clear strategic plan in place, supported by a business plan setting out how strategic goals will be achieved.
Alarmingly, the Grant Thornton survey revealed that 37% of UK business owners do not have a business plan. Of this figure, organisations with a turnover of less than £1 million are the least likely to have a plan (48%) while 95% of those with a turnover of more than £100 million do have one.
Graeme Forbes, Head of Grant Thornton's Entrepreneurial Services said, "A flexible, up-to-date business plan is critical to achieving commercial success, especially when targeting new markets. It is an essential finance raising tool and once your strategy is off the ground, it enables you to remain flexible and nimble in the face of change. Unfortunately, its value is all too often overlooked."
Even in Western Europe, where the UK has its strongest grip, a lack of business planning is evident.
Eight out of 10 business owners claim that the introduction of a single currency in 11 countries on 1 January 2002 will have little impact on their business.
Forbes said, "UK businesses need to address this issue as a matter of urgency. Any UK business trading with a country dealing in the euro will have to adapt its business processes to deal with the conversion. Firms must act now to ensure euro preparedness."
Forbes added, "With so much political spin surrounding the euro issue, businesses have been left confused by its implications. Regardless of the pros and cons of the UK joining the euro, it is a reality and Government needs to provide practical advice to companies, highlighting its implications to make trading with the euro clear and simple."
Dennis Turner, Chief Economist of HSBC Bank plc believes that indecision about monetary union is more unsettling for businesses than a definite yes or no, while Stephen Rendle, Managing Director of Tweed manufacturer, Hermitage Holdings Ltd, said, "The euro is happening and if we're going to trade in those countries, then let's get on with it and use it."
Dependency on key customers and suppliers is not an issue
On a more positive note, Forbes added that the results of the survey were encouraging as 85% of respondents indicated that they are not dependent on a key supplier or customer. He commented, "Diversification is critical to the long-term success of any business. Not only diversification of your products and services but diversification of your client and supplier base. Foreign markets provide a perfect opportunity to do this."
To help build on a firm's strengths and to develop a strategy to overcome the obstacles to success, Forbes advises business owners to take advantage of the full range of business advice and support services available. He commented, "Experts can provide in-depth local knowledge and fast access to specialist skills that can cut through obstacles. This will give more UK entrepreneurs a genuine chance at success abroad."
CBI "WORRIED" BY LATEST ECONOMIC DATA
The CBI last Monday said it was "worried" by new figures on industrial output and service sector activity.
Ian McCafferty, CBI Chief Economic Adviser, said: "The manufacturing data provide confirmation of the deepening downward trend in industrial output, which began well before Sept 11. But the monthly drop may have been exaggerated by the surprisingly strong data in August.
"It is also worrying to see further evidence of the downturn widening into the service sector, although it is too early to know to what extent this will take hold. In the immediate aftermath of Sept 11, there was serious disruption to travel, tourism and hotel bookings, and this has affected the data for October."
HSE ISSUES STRESS PREVENTION GUIDANCE FOR SMALL FIRMS
The 7 November was National Stress Awareness Day and The Health and Safety Executive (HSE) launched a new guidance for small firms on preventing work-related stress.
The leaflet, "Work-related Stress: A Short Guide", uses an easy to understand question-and-answer format and explains:
The publication has been awarded the Plain Language Commission's "Clear English Standard".
Work-related stress is a growing problem for British industry. About 5 million workers say that their job is very stressful, and about 500,000 experience work-related stress at levels that make them ill. This leads to 6.5 million working days lost each year, at an annual cost to society of £3.8 billion. It is the second biggest cause of occupational ill health generally, and the biggest cause of absence amongst non-manual workers.
Speaking at the Industrial Relations Services' Conference "Stress at Work" at the Berners Hotel, Berner Street, London, Elizabeth Gibby, Head of HSE's Psychosocial Issues Policy Unit, said:
"Work-related stress is a serious problem for Britain. The Health and Safety Commission has made it one of its top priorities, and we have a detailed programme of work that should put us well on the road to reducing it.
"In June, we published new guidance on stress aimed at organisations that employ more than 50 people. However, firms that employ fewer than 50 people account for 99% of all businesses and employ 44% of all non-Government employees. We are therefore launching this new guide, aimed specifically at helping these small firms."
Free single copies and priced packs of 10 of "Work-related Stress: A Short Guide" can be ordered online at http://www.hsebooks.co.uk or are available from HSE Books, PO Box 1999, Sudbury, Suffolk, CO10 2WA, tel: 01787-881165 or fax: 01787-313995. HSE priced publications are also available from all good bookshops.
NEW CONSTRUCTION ORDERS: SEPTEMBER 2001
Orders in the year to the third quarter of 2001 rose by two per cent compared to the previous year and orders in the third quarter of 2001 rose by six per cent compared to the same quarter a year earlier. Orders in the third quarter of 2001 rose by 11 per cent compared to the previous quarter, with rises in the infrastructure, private commercial and private housing sectors more than offsetting falls in the public housing, public non- housing and private industrial sectors.
Private housing orders in the third quarter of 2001 rose by nine per cent compared with the previous quarter and by four per cent compared with the same quarter a year ago. Orders in the year to the third quarter of 2001 fell by seven per cent. Public housing and housing association orders in the third quarter of 2001 showed a fall of 13 per cent compared to the previous quarter, but rose by 15 per cent compared to the same quarter a year earlier. Public housing and housing association orders in the year to the third quarter of 2001 rose by 14 per cent when compared to the previous twelve month period. All comparisons in this sector are affected by large variations due to its relatively small size.
Infrastructure orders in the third quarter of 2001 were 37 per cent higher compared with the previous quarter, and were 14 per cent higher than in the same quarter a year earlier. Orders in the year to the third quarter of 2001 rose by nine per cent compared with the previous twelve month period.
Public non-housing orders (excluding infrastructure) in the third quarter of 2001 were 12 per cent lower compared with the previous quarter, but were 21 per cent higher compared to the same quarter a year earlier. Orders in the twelve months to the third quarter of 2001 were one per cent higher when compared with the previous twelve month period.
Private commercial orders in the third quarter of 2001 were 20 per cent higher compared to the previous quarter, following high orders levels in the retail and entertainment sectors, but one percent lower than in the same quarter a year earlier. This fall was mainly due to low levels of office orders. Orders in the twelve months to the third quarter of 2001 were three per cent higher than in the previous twelve month period. Private industrial orders in the third quarter of 2001 were nine per cent lower than in the previous quarter, and three per cent lower compared to the same quarter a year earlier. Orders in the year to the third quarter of 2001 fell by one per cent compared with the previous twelve month period.
TOP TEN COUNTDOWN SHOWS BARRIERS TO BUSINESS
New survey charts the state of the economy and UK businesses' greatest concerns
Building the value of the business and coping with economic uncertainty are the biggest challenges facing entrepreneurial businesses throughout the UK, according to the findings of a new survey of 2,400 business owners and managers conducted by business and financial advisers Grant Thornton, launched on the 8 November 2001.
Graeme Forbes, Head of Entrepreneurial Services at Grant Thornton said, "The survey highlighted a number of key business issues - such as retaining and motivating staff, planning for succession and the burden of red tape - which respondents were asked to rank in order of importance. The current state of the economy and ever increasing legislation emerge as barriers to success and are clearly issues on which government and the business community must take action."
The chart countdown of business concerns gives a unique insight into the issues affecting UK businesses. The top three is unchanged since last year's inaugural study, but the emphasis has shifted significantly. Keeping its place at number one is building the value of the business, but in 2000 66% of respondents ranked it as their biggest worry, whereas in 2001 it is only of greatest concern to 50%.
The changing economic climate has proved to be much more of a concern this year, moving up into second place in the top ten, with 47% citing it as their biggest anxiety, compared to 30% in 2000.
Graeme Forbes continued, "It is highly likely that this reported level of concern about our economic outlook will have deepened substantially after the tragic events of 11 September. Faced with high levels of uncertainty, business leaders are having to make increasingly tough decisions about managing their businesses during a downturn, but we also know that some see the situation as creating opportunities to expand their business. Either way, effective management skills are going to be highly prized."
Staffing issues continue to place a significant burden on business, with 46% viewing the retention and motivation of staff as their biggest challenge, although it is not as high on the boardroom agenda this year compared to 2000 when 52% said it was of most concern.
The red tape surrounding owner-managed businesses is continuing to strangle their competitiveness, with 42% seeing it as having the most substantial impact on their business. Parental regulations emerged as the legislation inflicting the most damage on business flexibility, with over 30% of respondents viewing this as the biggest burden, followed by the working time directive and part time workers regulations.
Other key findings of the Owners' Day survey include:
Graeme Forbes concludes, "The Owners' Day findings make it clear that British business owners are going through a difficult period but remain cautiously optimistic about the future of their businesses. It is also clear, however, that the increasing administrative and legislative burden is taking its toll on the ability of businesses to retain their competitive edge. As a leading business and financial adviser to this sector, Grant Thornton intends to throw it's full weight behind tackling the problems outlined in this survey, both by devising practical solutions for business owners and championing the cause of this sector before Government."
VAT ON EMPLOYEE EXPENSES
VAT recovery on employee expenses and mileage allowances is under threat following a recent European Court decision.
The European Commission took a case against the Netherlands on the recovery of VAT on mileage allowances paid to employees. The Netherlands, like the UK, allows companies to recover an element of mileage allowances paid for business journeys.
The ECJ's decision is that a mileage allowance breaks the chain of supplies between taxable persons which is necessary for VAT to be deducted. In addition, as there is no taxable supply, no VAT invoice can be provided to the employer, so no VAT recovery can take place. The result is that national legislation should not entitle employers to recover VAT in respect of mileage allowances.
The Commission has also commenced proceedings against the UK, and the UK contributed arguments in the Netherlands case. Now that the judgment has gone in favour of the Commission, the UK will be expected to change its legislation or face court proceedings. Any change in UK legislation will clearly have a significant impact on any company which pays mileage allowances to employees undertaking business journeys. However, there is no chance of retrospective changes as taxpayers have a clear entitlement to claim until the existing UK legislation is amended.
KPMG has had discussions with Customs & Excise regarding the implications of the case and Customs' possible options. Given the significant impact on UK taxpayers, it is important that the most favourable treatment possible is achieved and we shall do whatever we can to assist Customs to obtain this result.
To make matters worse, in recent years there has been a trend away from providing employees with fuel cards and towards reimbursement by way of mileage allowances. This has resulted from the increase in personal tax scale charges applied to individuals who receive fuel for private use and the cost of national insurance contributions for employers providing fuel for private use. This VAT decision means it will be worthwhile to reconsider the method used to reimburse employees for fuel used on business journeys taking into account all relevant factors. Fuel cards could be one option to consider.
KPMG has considerable experience in advising on all aspects of car and employee taxation and we should be happy to discuss this issue with you with a view to carrying out a review of the options available.
The decision will also have an impact on other expenses incurred by employees such as phone bills, hotels, meals, taxis and miscellaneous purchases so any review should cover all types of expenses.
Parsippany, NJ, November 5, 2001- Gearing up to expand market share in Europe, The GETPAID® Corporation, the leading provider of receivable management software, today announced new members of the sales and client services teams.
"We are pleased to announce the addition of Richard Brown, account manager and Mark Edwards, business process manager for our UK office," states Dianna Piumelli, president and COO of The GETPAID Corporation. "Both of these individuals bring with them vast knowledge of software for the credit and collections industry. For the past several months they have been preparing for our 2002 initiatives for the UK market. We anticipate that both Richard and Mark will be great assets as we continue to expand our user base."
With over 500 installations, in more than eighteen countries, and over 5,500 users, GETPAID is the standard in credit and collections software. UK companies such as Iomega International, QAD, EMC International, and Peregrine Systems have implemented the GETPAID solutions.
Worldwide Receivable Management
GETPAID offers web-enabled collection and dispute resolution systems with multiple currency and languages for global use, a powerful report writer, and a strategic approach to receivable management. GETPAID uses configurable strategies to drive the collection process. International collection activities can be tailored to suit the specific cultural and logistical requirements of each country or region.
Proven Results
Companies who implement GETPAID see a reduction in their past due receivables of 25% or more, and a decrease in outstanding disputes of 30-50%. GETPAID automatically notifies and assigns invoice problem owners, tracks the resolution process and escalates disputes as defined in a user-defined matrix.
About The GETPAID Corporation
The GETPAID Corporation is the leading provider of collection and dispute resolution software used by thousands of commercial collectors in B2B credit departments to manage billions in past due receivables. GETPAID is based in
New Jersey, United States, with offices worldwide.
The GETPAID Professional Services team is comprised of experts who deliver installation, system configuration, training and on-going support services to the more than 500 installations worldwide in a wide array of companies, industries and environments.
For more information, contact GETPAID at 01344 887407 (UK) / 1-973-463-1500 (US) or visit www.getpaid.co.uk
NEW TAX RISK FOR INVESTORS IN JOINT VENTURES
The Inland Revenue's consultative document Corporate Debt, Financial Instruments and Foreign Exchange Gains and Losses, issued on 26 July 2001, proposes that the definition of 'control' for corporate debt purposes should be similar to the definition used for the controlled foreign companies legislation.
This would raise significant issues for joint ventures (JVs), as the drafting would deem investors in a JV company to be connected with the JV company in circumstances where they each had a 40% interest and were party to a loan relationship with the JV company. Currently, investors in a JV are only treated as connected with the JV company if they control the JV company in their own right.
If these proposals were introduced, any bad debt relief which had previously been claimed by the investors in respect of loans to the JV company would be clawed back.
Representations on this issue have been submitted to the Inland Revenue. However, investors in JVs may be disadvantaged if the 40% test is introduced and no transitional provisions are made to prevent bad debt relief being clawed back purely as a result of the change to the definition of 'control'. Investors in JVs should therefore (a) review their investments to see whether it is necessary to unwind loans to JV companies before the change comes into effect and (b), if unwinding is indeed necessary, consider how best to do it.
FRAUD POLICE CRYING OUT FOR MORE HELP AS UK BUSINESS SUFFERS
As the UK business world becomes more and more of a target for fraudsters, senior police figures are calling for more support to help businesses fight the rising wave of deception.
Speaking at the recent KPMG-sponsored Midlands Fraud Challenge 2001 Forum, Det Supt Ken Farrow, Head of the City of London Police Fraud Squad, claimed that the Government needed to provide more resources in the battle against increasingly sophisticated conmen.
Farrow said: "Right now, the UK is a target. People are coming here simply to rip us off, infiltrating organisations for example and looking for idle bank accounts. With HR and personnel departments not having the checking mechanisms in place that they could to vet new staff, fraud is on the increase. Organised crime is moving into fraud as it is rapidly becoming worth more than importing drugs."
Farrow pointed out that many businesses are often left unsure as to what to do when they find a fraud has been perpetrated against them. Even when they do take their concerns to the police, they are often left disappointed as the under-resourced squads are unable to investigate the crime satisfactorily.
He continued: "The financial sector is our bread and butter. We can't afford to have only the existing 600 fraud officers across the UK working on these kinds of fraud. Even with such depleted numbers, detectives are constantly being pulled away on to other types of investigation. There is a feeling that fraud can wait when compared to other crimes such as rape or murder. These crimes are obviously terrible offences and need to be fully investigated as quickly as possible. However, it does leave us short-handed quite often; a problem exacerbated by the increasing pressure on us to push fraud cases through the courts much quicker."
In the face of these mounting concerns, Farrow reaffirmed his desire to see the creation of a national fraud squad to better coordinate the police's response to fraud and increase the amount of available resources. Proposals for such a squad are due to be submitted to the Cabinet during the next four weeks with extra resources and funding being seen as essential if the authorities are to start clawing back some of the estimated £13.8bn which fraud cost the UK economy last year.
In the face of rising fraud levels, David Alexander, a Fraud Investigation partner with KPMG in Birmingham, commented: "With such a strain being placed on police resources, it is in the interests of business to help itself. Just as a house can be made more secure with window locks and alarms, a business can likewise be made more secure by simple procedural steps. These can include instigating more robust HR controls and regularly communicating a business's fraud and ethics policy to employees. In addition, initiatives such as Partners Against Crime, where the private sector helps the police on investigations, contribute towards the efficient investigation and prosecution of fraudsters."
Despite the huge amounts which fraud is already costing the UK business scene, there is concern that these figures could still increase yet further as fears of recession grow. DS Farrow concluded that: "Swindles are likely to increase as the recession takes hold as people who have suffered financial difficulties themselves may well turn to fraud to ease the situation. In fact, 80 per cent of frauds are committed by people who have worked for a company or have some degree of knowledge of how it works."
DEBT COLLECTION – A $13 BILLION INDUSTRY IN TRANSITION, WITH OUTSOURCING GROWING AT 25 TO 30% ANNUALLY ACCORDING TO A REPORT PUBLISHED BY KAULKIN GINSBERG COMPANY
Bethesda, MD, November 2, 2001: Debt collection has grown to a $13 billion industry according to The Kaulkin Report, a report published by Kaulkin Ginsberg Company and its virtual affiliate, CollectionIndustry.com.
The report identifies that while contingent collections were growing at a rate of 9% between 1998 and 2000, outsourcing of service functions by businesses were growing an annual rate of 25 to 30%. According to Mike Ginsberg, President of Kaulkin Ginsberg, “the $13 billion debt collection industry is growing not only in revenues, but also in importance to corporate America as a provider of essential outsourced business services such as call centers and accounts receivable management”.
The report also reviews the development of new business lines and the dramatic shift in industry leadership, and points out that 9 of the 10 largest agencies existing in 1996 have changed hands. Ted Smith, a Vice President of ACA International said “Kaulkin Ginsberg has put together a great resource for anyone interested in learning about this market.” Jack Lavin, CEO of Arrow Financial Services, a leading debt purchasing and accounts receivable management firm, said the Kaulkin Report is “an excellent reference guide to an exciting and fast changing industry”.
This 5th edition of The Kaulkin Report examines the industry’s market size and services, the market outlook and forecast, the major players, and the M&A implications. It shows how the top 10 agencies continue to absorb more of the overall market, with revenues rising from $910 million in 1995 to $2.5 billion in 2000. Spencer Nilson, publisher of the Nilson Report, a leading expert on payment systems stated, “The Kaulkin Reportă contains information not available elsewhere and is very well written.”
The report contains charts, graphs, proprietary statistics, and quotes from industry figures, along with insights into many collection industry interests. With 68 pages, this 5th edition of the Kaulkin Report© is the most comprehensive information available on the industry.
Other topics covered include:
Websites www.kaulkin.com and www.collectionindustry.com Email mike@kaulkin.com
EXPORT NEWS - MEXICO
The implications stemming from a US recession are starting to be felt in Mexico. S&P added to the bad news, announcing that the potential to raise Mexico to investment grade is now on hold. Practically speaking, this will delay additional investment dollars that Mexico could use as the economy begins to grind to a halt. S&P also noted that asset sales stemming from Cintra (airline) and the state's minority holding in Bancomer (expected to generate a total of US$ 4 billion) have been put on the back burner. This delays another source of government revenue in the near term.
Mexico is also feeling the impact of softer international oil prices. Last Thursday, September 27th, OPEC members opted not to alter production levels. Many OPEC members believe that they need to do their part by not adding to the economic recession, even if the OPEC oil basket falls below the US$ 22 level for 10 consecutive days (triggering the ability to cut production by 500,000 B/D). In the opinion of the Kuwaiti Oil Minister, Adel Al-Subeih, the price band mechanism is only an appropriate tool during normal market conditions, and not during extraordinary situations as currently exist.
Appetite for Latin American corporate bonds has now all but evaporated as a result of economic events. Issuers including CEMEX have put expected issues on hold. Bank lending, however, should be a relatively bright spot, and we would expect to see increased borrowing by the best corporate names.
The US Federal Reserve dropped the Fed Funds rate another 50 bps on Tuesday, October 2nd, after its extraordinary 50 bps drop on September 17th. This places the target Fed Funds rate at 2.5%, the lowest level seen in nearly 40 years and below annual inflation, which at August 31st was 2.7%. On this basis, the "real interest rate" is actually below zero. However, the Fed Funds rate is an overnight rate, and it is more appropriate to look at inflation activity for the past couple of months (essentially zero) making the recent rate decrease justifiable. The US has now moved into uncharted waters with its aggressive monetary policy, creating a heightened concern that inflation will pick up down the road.
Given the limited bright spots in the Mexican economy and the Finance Ministry's continued pledge to keep the budget shortfall at no more than 0.65% of GDP, it would seem clear that any increased revenue sources at this point are going to come from fiscal reform. Unfortunately, there seems to be little consensus within Congress as to how to accomplish this. It appears that there is little hope of including the 15% VAT on food and medicine as the administration had been seeking. So how can the government generate the same impact as it would have done by broadening the VAT tax to raise revenues from 11% to 16% of GDP?
Many options are flying around the political arena in Mexico. Discussions include lowering electricity subsidies, raising gasoline taxes, fast-tracking casinos and allowing greater taxing authority to the states.
It is not clear from where the cohesion for consensus will come, but given that the government has now officially acknowledged that economic growth for 2001 is expected to come in at less than 1% (Santander Serfin projects -0.2% to 0.2%), concrete action on the part of the political parties is all the more critical.
GOVERNMENT TO REMOVE THE 20 PARTNER LIMIT ON COMPANY PARTNERSHIPS
Moves to increase flexibility for business and remove outdated and unnecessary burdens have been announced by Consumer and Competition Minister Melanie Johnson.
The Government intends to remove the current limit on the number of partners in partnerships through a Regulatory Reform Order.
Subject to Parliamentary approval, the Regulatory Reform Order will remove the limit, currently set at 20 partners for partnerships and limited partnerships.
Ms Johnson said:
"The limit has outstayed its usefulness. Removing the 20 partner limit will ease administrative burdens on larger partnerships, especially those that wish to expand. This Government is committed to removing unnecessary regulations which serve neither business nor the consumer."
The Government recently consulted on removing the limit. Respondents gave the following reasons in support of the proposal:
The Department will now prepare a formal Explanatory Document, which would accompany any proposal for a Regulatory Reform Order under the Regulatory Reform Act 2001, in preparation for scrutiny by Parliament. This will be the first Regulatory Reform Order placed before Parliament by the Department under the Regulatory Reform Act 2001.
The proposal to abolish the limit on the number of partners allowed in a partnership was one of the examples of possible regulatory reform proposals announced by then Minister for the Cabinet Office, Mo Mowlam in November 2000, as part of a move against out-dated and over-burdensome legislation.
Section 716(1) of the Companies Act 1985 prohibits the formation of partnerships with more than 20 partners (with certain exemptions). This dates back to 1856. A similar prohibition exists for limited partnerships under section 4(2) of the Limited Partnerships Act 1907, again with certain exemptions.
Regulations over the last thirty years have increased the number of exemptions for specified professions. However, such changes have been piecemeal in response to external demand. Those exempt include solicitors, accountants, chartered surveyors and doctors. Typically, a majority of the partners must be members of the specified profession before it is eligible for exemption.
The current position merits a complete review in the light of changes in business practice and organisation over many years. The Law Commissions' recent consultation on the reform of Partnership Law proposed, amongst other things, the abolition of the 20 partner limit. In addition, the recently published Myners Report on Institutional Investment recommends that the Government should significantly increase the maximum number of partners permitted in a limited partnership.
Information about the Regulatory Reform Act 2001 can be found at: http://www.cabinet-office.gov.uk/regulation/act/index.htm
There is also a feedback form at http://www.cabinetoffice.gov.uk/regulation/feedback.asp which people are invited to use for any suggestions they may have for regulatory reform. Each suggestion will receive a considered reply.
Former clients of East London-based shipping company Cargo Forwarding International PLC are reminded that they have until the end of November to recover their goods.
The company which traded from premises in East London and Manchester, was wound up in the public interest on 25 April 2001. The Official Receiver was appointed liquidator and has been trying to contact customers of the company since then.
The company, which had been trading since 1994, was wound up after it failed to deliver goods to clients. Most clients had paid in advance for freight services and had taken out marine insurance, however, as the company failed to keep up with its insurance premiums, customers' policies were invalid.
In May, Beckton warehouse was opened for three days to allow customers to collect their goods, but around two thirds of the contents were unclaimed. Any goods which are unclaimed by 30 November 2001 will be disposed of.
All goods are currently in storage with the Official Receiver's agents:
Charles Taylor (Manchester)
Sandersteads (London)
Agents estimate that 50 clients are still to recover their goods from Manchester, and 250 clients from Sandersteads.
Former customers who believe their shipping consignments are still with the company and have not already contacted the Official Receiver should provide details of their contract number, email address, mailing address and the nature of their consignment to:
Official Receiver
Aminur Choudhury
The Insolvency Service
Public Interest Unit
21 Bloomsbury Street
London
WC1B 3SS
Customers will be informed of arrangements for collection of their goods.
Anyone with any information relating to the company, its dealings or property should contact the Official Receiver at the address above.
The last registered office of Cargo Forwarding International was 96 London Industrial Park, Roding Road, London E6 4LS. The company traded from 96 London Industrial Park, Roding Road, London E6 4LS and Unit 38 Imex Business Park, Hamilton Road, Longsight, Manchester. From March - June 1995 the company traded from Unit A2 Broomseigh Business Park, Worsley Bridge Road, London SE26 5BN.
The company was wound up in the High Court on 25 April 2001, on the petition of the Secretary of State for Trade and Industry.
FORMER ALLIED CARPETS DIRECTOR CONSENTS TO SEVEN YEAR DISQUALIFICATION
The former managing director of Allied Carpets Group has been disqualified as a director for seven years following a DTI investigation.
The Secretary of State for Trade and Industry accepted a disqualification undertaking from Raymond Anthony Nethercott of 29 Vicarage Wood Way, Tilehurst, Reading, after an investigation by Companies Investigation Branch of the DTI revealed his unfit conduct.
The investigation found that Mr Nethercott had knowingly inflated sales figures in accounting records, giving an untrue picture of the state of company finances and profits.
This practice, also known as 'pre-despatching', dated from 1992 to 1998, and was discovered in an internal audit in July 1998. Auditors calculated that the 'accounting irregularities' meant that Allied was overstating sales by more than £6 million, and boosting profits by more than £2 million.
Mr Nethercott, who had denied involvement in this practice, was found to have lied to auditors and was dismissed in 1999.
The investigation found Mr Nethercott responsible for the policy of pre-despatching which was in breach of company accounting policy; the practice had been deliberately concealed from the company's auditors and the company's published accounts were consequently misleading and failed to comply with company law - Section 226 of the Companies Act 1985. Poor company operating practices were blamed for the practice continuing unchecked for so long.
Companies Investigation Branch ("CIB") is part of the Company Law and Investigations Directorate of the Department of Trade and Industry.
CIB carries out confidential enquiries under Section 447 of the Companies Act 1985 and where necessary, takes further action in the name of the Secretary of State. This can include winding up proceedings in the public interest or disqualification proceedings against directors.
Section 8 of the Company Directors Disqualification Act 1986 allows the Court to make a disqualification order of up to 15 years for unfit conduct. On 2 April 2001, amendments were introduced by the Insolvency Act 2000 allowing directors, with the agreement of the Secretary of State, to avoid the need for a Court hearing by offering an acceptable disqualification undertaking. This has the same legal effect as a disqualification order made by the Court and usually includes a schedule identifying the director's unfit conduct. The consequences of breaching a disqualification undertaking are the same as those for breaching a disqualification order.
Contravention of a disqualification order or a breach of a disqualification undertaking is a criminal offence and may result in a fine or imprisonment for up to two years. Information relating to persons acting in contravention of this provision should be passed on to the Department on 0845 601 3546.
Allied Carpets
Allied Carpets Group Plc started life as private limited company in 1991, following a management buy-out from the receivers of the Lowndes Queensway Group. It expanded rapidly, principally through the acquisition in late 1993 of the Allied Maples Group from Asda Group, and in July 1996 its shares were floated on the London Stock Exchange at a time when its reported turnover from 230 retail outlets was £230m resulting in an apparent net profit of £14.5m.
In July 1998, the listing of the company's shares was suspended at the company's own request following the discovery of accounting irregularities which involved the inappropriate early recognition of sales income at each half year and year end since 1993; this practice was widely known within the company as 'pre- despatching'. The irregularities were investigated by the company's auditors who discovered an overstatement of sales as at 27 June 1998 amounting to £6.3m with an estimated uplift on net profit of £2.1m.
This discovery led to the enforced resignations of the company's finance director and trading operations director. In April 1999, Mr Nethercott was dismissed without compensation.
The Secretary of State accepted the disqualification undertaking based on the following unfit conduct with which Mr Nethercott agreed:
From in or about December 1992 until 1998, Mr Nethercott, devised and initiated, or alternatively failed to prevent the devising and initiation of, and thereafter implemented and retained, the policy and practice of pre-despatching which policy and practice,
Public Enquiries: 020-7215 5000
Textphone (for people with hearing impairments): 020-7215 6740 http://www.dti.gov.uk
NEW RESCUE CULTURE AND CONSUMER CONFIDENCE LEADS TO FALL IN INSOLVENCIES
A combination of healthy consumer spending levels over the summer and moves by the Government to take a more collaborative approach to troubled businesses has contributed to a fall in company liquidations in the third quarter of 2001, according to PricewaterhouseCoopers and the DTI. The latest DTI figures reported by us last week revealed that in the third quarter of 2001, 4,164 companies became insolvent in England and Wales, a decrease of 5% on the previous quarter and a decrease of 1% on the same period a year ago.
The number of companies being forced into compulsory liquidations in the third quarter 2001 fell to its lowest level since records began in 1993, falling by 24% on the previous quarter, to a total of 991. This reflects a more open approach to debt-ridden companies now being taken by both the Inland Revenue and Customs and Excise, to avoid companies being wound up unnecessarily, but is also a factor of resilient consumer demand over the summer period. However, the figures do not take into account recent shocks to the international economy, and an increase in insolvency work at PricewaterhouseCoopers since early October suggests there may be a significant upturn in company failures in the fourth quarter 2001.
Neville Kahn, Business Recovery Services partner at PricewaterhouseCoopers, commented:
"Continuing levels of consumer confidence over the summer period, together with the Government's more collaborative approach to troubled businesses, contributed to a fall in company insolvencies in the third quarter 2001. However the appearance of UK companies weathering the global downturn may soon give way to a harsh reality as the impact of current market instability leads to a sharp increases in insolvencies. The businesses that successfully ride out the current climate will be those prepared to make tough early decisions to head off problems, while making cash management their number one priority."
"We've already seen an increase in insolvencies over the first few weeks of the current quarter, as well as a rise in informal loan workouts and restructuring of unsecured bond debt across a wide range of companies, some widely publicised, others much less so".
SIGNUM CIRCUITS IN RECEIVERSHIP
Signum Circuits, the leading manufacturer of high technology multi-layer printed circuit boards, is in receivership.
The Selkirk-based company, which had a turnover of £29m to December 2000, employs 325 staff across three sites (Selkirk - 223; Calne near Swindon - 87; and Southampton - 15).
The receivership has been caused by a drop in orders following the downturn in the telecoms sector, the main market for the company's products. The market and the business has also been affected by the impact of the terrorist attacks on the USA.
Prior to the downturn in the telecoms sector, the company had been trading strongly and had grown turnover to a record £29m in 2000, had 518 employees and had recorded good profits. The business had also invested heavily in new production facilities in anticipation of further growth and had expanded into system manufacture for OEM's (Original Equipment Manufacturers) from its new Southampton facility.
Receiver, Blair Nimmo of KPMG Corporate Recovery said: "It is very rare to come across a company with a solid track record of growth and profitability, but whose order book has declined so dramatically. That is essentially what has happened to Signum Circuits. Whilst it is fundamentally a strong business with a highly skilled workforce, blue chip client base and excellent facilities, it has been adversely affected by factors entirely outwith its control.
"Long term, we think the business has considerable potential and should prove attractive to a company looking to develop or expand in this sector however, it needs to be ready and able to capitalise on the upturn, as and when it comes. Our strategy, therefore, will be to continue to trade the business, align its cost base to the current market and actively seek a buyer for it as a going concern."
The Southampton and Calne facilities have closed with immediate effect with all activities now focusing on Selkirk.
*** FORTHCOMING CREDITORS MEETINGS ***
For detailed information on the British Isles insolvency's (liquidation's, receiverships, administrations, dividends, creditors) please visit http://www.insolvency.com/cgi-bin/gazette/liq/nots.pl
TW LW TW LW
USA 1.46 1.45 Canada 2.33 2.28
Austria 22.42 22.18 Portugal 326.68 323.28
France 10.68 10.57 Belgium 65.73 65.04
Finland 9.68 9.58 Italy 3155.14 3122.20
Germany 3.18 3.15 Sweden 15.51 15.27
Holland 3.59 3.55 Switzerland 2.40 2.37
Spain 271.12 268.29 Ireland 1.28 1.27
Australia 2.85 2.87 Denmark 12.13 11.99
Hong Kong 11.44 11.33 Euro 1.62 1.61
Africa Com 14.01 13.54 Saudi Arabia 5.50 5.34
India 70.38 69.72 Malaysia 5.57 5.52
Singapore 2.66 2.66 Norway 12.98 12.84
Japan 177.77 177.56
TW This week LW Last week.
Sabena Belgiums flag carrier suspended all flights and filed for bankruptcy.
Canada 2000 one of Canada's airlines has also filed for bankruptcy.
Ryanair reported profits were up 39% on a year ago for the six months ending September.
Emirates the Dubai-based airline has placed orders with Airbus Industries and Boeing for new aircraft.
Danka Business announced pre-tax profits of 150.8 million pounds, after exceptional credit, on turnover of 599.4 million, for the six months ending 30th September 2001. Earnings per share stand at 43p, on increased capital.
Exeter Investment announced pre-tax profits of 5.51 million pounds, on turnover of 15.5 million, for the year ending 30th September 2001. Earnings per share stand at 38.8p.
Fenner announced pre-tax profits of 12.3 million pounds, after exceptional charge, on turnover of 166.4 million, for the year ending 31st August 2001. Earnings per share stand at 8.6p.
Scottish Power announced pre-tax losses of 134.9 million pounds, after exceptional charge, on turnover of 3,297 million, for the six months ending 30th September 2001.
MERGER NEWS
The Secretary of State for Trade and Industry has decided, on the information at present before her, and in accordance with the recommendation of the Director General of Fair Trading, not to refer the following mergers to the Competition Commission under the provisions of the Fair Trading Act 1973:
Proposed acquisition by Greene King plc of Old English Inns plc
Proposed acquisition by Marlborough Stirling plc of Exchange FS Group plc
ACQUISITIONS AND MERGERS INVOLVING UK COMPANIES 3RD QUARTER 2001
Expenditure on acquisitions of UK companies by other UK companies increased from £4.9 billion in quarter two 2001 to £15.7 billion in quarter three. Two large transactions were responsible for much of this value.
Expenditure on acquisitions abroad by UK companies decreased from £12.6 billion in quarter two 2001 to £7.4 billion in quarter three. The largest transaction was Reed Elsevier Plc acquiring Harcourt General Inc. for a press reported value of £3.2 billion.
Expenditure on acquisitions in the UK by foreign companies decreased from £6.8 billion in quarter two 2001 to £4.0 billion in quarter three. The largest transaction was the acquisition of Blue Circle Industries Plc by Lafarge SA for a press reported value of £2.1 billion.
ACQUISITIONS ABROAD BY UK COMPANIES
The largest transaction recorded during quarter three 2001 was the acquisition of Harcourt General Inc. by Reed Elsevier Plc for a press reported value of £3.2 billion. This transaction accounted for 43 per cent of the total value.
There were 19 disposals and demergers in the third quarter of 2001 valued in total at £6.2 billion.
Significant transactions abroad by UK companies include :- Reed Elsevier Plc acquiring Harcourt General Inc. Reed Elsevier Plc disposing of business divisions of Harcourt General Inc. TI Automotive Ltd acquiring automotive systems division of Smiths Group Plc Smiths Group Plc disposing of automotive systems division Old Mutual Plc acquiring Fidelity and Guaranty Life Insurance Co Emap Plc disposing of Emap USA division BP Amoco Plc disposing of American refineries Allied Domecq Plc acquiring Montana Group Mysis Plc acquiring Sunquest Information Systems Inc. Bass Plc acquiring Regent Hong Kong HotelACQUISITIONS IN THE UK BY FOREIGN COMPANIES
The largest transaction recorded during quarter three 2001 was the acquisition of Blue Circle Industries Plc by Lafarge SA for a press reported value of £2.1 billion. This transaction accounted for 53 per cent of the total value. There were 7 disposals and demergers in the third quarter of 2001 valued in total at £0.5 billion.
Significant transactions in the UK by foreign companies include :- Lafarge SA acquiring Blue Circle Industries Plc Kohler Corporation acquiring Mira Showers division of HSBC Private Equity Kruidvat Beheer BV acquiring Superdrug division of Kingfisher Plc MidAmerican Energy Holdings Co acquiring Yorkshire Electricity division of Innogy Holdings Plc J P Morgan Chase disposing of Fleming Premier banking division to Abbey National PlcACQUISITIONS AND MERGERS IN THE UK BY UK COMPANIES
There were 75 transactions in the third quarter of 2001. These consisted of 42 acquisitions of independent companies with an initial value of £13.8 billion and 33 sales of subsidiaries between company groups with an initial value of £1.8 billion.
Significant transactions in the UK by UK companies include :- Management buy-out of Britax International Plc Easynet Group Plc acquiring Ipsaris Ltd B L Davidson Ltd acquiring ASDA Property Holdings Plc Johnson Matthey Plc acquiring Meconic Plc Management buy-out of Dewhirst Group Plc Nestor Healthcare Group Plc acquiring Healthcall Management buy-out of Hays Chemicals Ltd Abbey National Plc acquiring Fleming Premier banking division of J P Morgan ChaseMELANIE JOHNSON PUBLISHES COMPETITION COMMISSION'S CONCLUSIONS ON DURALAY/GATES MERGER
Melanie Johnson, Minister for Competition, Consumers and Markets, has published the Competition Commission's (CC's) report on the proposed acquisition of Gates Consumer and Industrial by Duralay International Holdings Ltd. which concludes that the merger may be expected not to operate against the public interest.
The CC considered whether the merged company would be in a position to use its market power to raise prices or engage in anti-competitive practices. The CC concluded that given the nature of competition in the underlay and gripper markets, sufficient constraints would operate on the merged company to prevent it from making significant prices increases or engaging in anti-competitive practices.
The proposed acquisition by Duralay International Holdings Ltd of Gates Consumer & Industrial was referred on 28 June 2001 by the Minister for Competition, Consumers and Markets to the Competition Commission under the Fair Trading Act 1973. The CC submitted its report on 15 October 2001.
The Fair Trading Act 1973 empowers the Secretary of State to refer to the CC for investigation and report actual or proposed mergers which create or intensify a market share of over 25 per cent of the supply in the UK, or a substantial part of the UK, of particular goods and services or involve the take-over of assets exceeding £70 million.
Copies of the report 'Duralay International Holdings Ltd and Gates Consumer & Industrial (part of the Tomkins PLC Group) - a report on the proposed merger' (Cm5289) are available from The Stationery Office, priced £18.00. Tel: 0870 600 5322.
The CC found that while the merger would give the merged entity a very large market share, which would normally give rise to competition concerns, in this case, the CC is satisfied having considered all the evidence, that the markets for the supply of underlay and gripper in the UK have some distinct features which are likely to facilitate competition. Underlay and gripper are moreover secondary products and have to be considered in the wider context of sales of carpets.
Consumers have made savings and benefited from new telecoms services as they make the most of the wide range of competitive offers available, new research published by Oftel reveals.
Key findings of the research are:
Oftel has also welcomed today's publication of a new leaflet by the telecoms industry to help consumers make better use of the choices available to them by enabling them to compare the performance of fixed line phone companies.
The new, easy-to-use leaflet - 'How well did your telephone company do?' - shows how efficiently all the main operators completed orders, dealt with faults and handled complaints and billing issues between January and June 2001.
David Edmonds, Director General of Telecommunications said today:
"Our research shows that UK consumers are taking advantage of the wide range of competitive telecoms services on offer and are making savings on their phone bill.
"Another 200,000 businesses have gone on line and half the adult population now use the Internet.
"With so much choice available, greater consumer awareness about price and quality is needed so that even more people can benefit from the competition that exists in the market.
"The new leaflet published today shows that the industry is working to meet the demands of consumers by providing clear and concise information to help consumers judge the performance of the different telephone companies.
"Oftel will continue to work closely with the telephone companies to improve the quality of the information in all areas of the telecoms market."
The research published today is in six parts and is available from Oftel's website:
Oftel surveys into business consumers use of fixed, Internet and mobile services for August 2001
http://www.oftel.gov.uk/publications/research/2001/q6fixb1101.htm
http://www.oftel.gov.uk/publications/research/2001/q6intb1101.htm
http://www.oftel.gov.uk/publications/research/2001/q6mobb1101.htm
Oftel surveys into residential consumers use of fixed, Internet and mobile services for August 2001
http://www.oftel.gov.uk/publications/research/2001/q6fixr1101.htm
http://www.oftel.gov.uk/publications/research/2001/q6intr1101.htm
http://www.oftel.gov.uk/publications/research/2001/q6mobr1101.htm
Hard copies of these reports are available to the public from the Research & Intelligence Unit on 020 7634 8761.
For further copies of the residential consumer leaflet - 'How well did your telephone company do?' please e-mail cpi@cpi.org.uk or telephone 0131 472 5558. The leaflet is also available at http://www.cpi.org.uk
Monday 12 November Wessex Branch of the ICM European Credit Checking - Speaker/Sponsor ICC Information Ltd Venue - Royal Southampton Yacht Club 1 Channel Way, Ocean Village, Southampton SO14 3QF Time : 7.00 pm for 7.30 pm Refreshments provided Monday 12th November Stoke on Trent Branch of the ICM "Credit Management Qualifications: the UK and Beyond" Presented By Russell Kennard, MBA AIMC, founder-owner of Kennard & Co For details please contact the event organiser: Catriona Colerick, MICM (Grad.) on Tel. 01782 28 2430 Thursday 22 November Sussex & Surrey Branch of the ICM Factoring/Invoice Discounting/Asset Finance Speaker: To be advised Venue - HSBC, Farncombe Road, Worthing Time: 7.00 for 7.30 p.m. Sponsored by HSBC 4-6 December Online Information 2001 Olympia Grand Hall, London Wednesday 5 December The GETPAID Corporation's free half-day seminar Using Technology to Improve Your Cash Flow The Slouth/Windsor Marriott Hotel, Langley, Berkshire, SL3 8PJ Time: 08.00 For more information, call 01344.887.407. Monday 10 December Wessex Branch of the ICM Quiz Night - Sponsor Virtual Mailroom Ltd Venue - Royal Southampton Yacht Club 1 Channel Way, Ocean Village, Southampton SO14 3QF Time : 7.00 pm for 7.30 pm Refreshments provided Monday 14th to Thursday 17th January 2002 ICM Examinations Thursday 24 January 2002 Sussex & Surrey Branch of the ICM Annual General Meeting Followed by Dinner. Speaker: To be advised Venue - The Imperial Hotel, Hove Time: 7.00 for 7.30 p.m. Friday 22 February 2002 Debt Sale & Purchase Credit Today, Savoy Hotel, London The second annual debt sale and purchase conference chaired by Rob Levick. For details e-mail carleen@credittoday.co.uk Wednesday 13 March 2002 ICM National Conference and Exhibition Heritage Motor Centre, Gaydon near Warwick For full details tel 01780-722907 or e-mail training@icm.org.uk If you have an event coming up which is credit management related and you would like us to make an entry in the Diary section please e-mail the details to jarnold@creditman.co.uk
Alternatively you may use the email interface. email creditman-request@mailing-list.cyberstrider.net with the word Help in the subject line for details.
Business Credit Management UK: John Arnold jarnold@creditman.co.uk
Business Credit News UK: Pat Williams pwilliams@creditman.co.uk