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 40
Dated: 28 October 2001
Welcome to the Business Credit News UK.
In this weeks edition you will find the following topics.
UKUK CONSUMER IS CAT WITH NINE LIVES
UK consumer is cat with nine lives, says ITEM – so long as 'policy overkill' doesn't choke it with cream London, 22 October 2001: The Ernst & Young ITEM Club's quarterly report for Autumn 2001 (Q4) predicts GDP growth of 2.2 per cent this year, easing back to 2 per cent in 2002, before accelerating to 2.9 per cent in 2003.
Earnings and employment to slow
The weakness of the United States' and European economies over the next twelve months is a double blow for industry: it makes the United Kingdom look good and will keep the pound overvalued. This is one of a number of factors depressing profitability – in services and manufacturing. However companies are responding to this situation aggressively – through outsourcing, moving production abroad and forcing up productivity at home. Household earnings and employment will slow as a result, followed by consumption next year.
Euro referendum fades from view
When the world economy improves, and the pound falls back to a more helpful valuation for exporters and manufacturers, the Ernst & Young ITEM Club says that they will reap the rewards of the creativity that they are currently employing to keep their heads above choppy waters. However the decline in sterling may come too late for it to be safe for the Prime Minister to go for a referendum on the Euro.
UK remains calm in face of adversity
As this month's figures show, the UK economy continues to weather recessionary squalls and remain relatively calm in the face of adversity. "From a European and United States' perspective, the UK consumer is starting to look like the proverbial cat with nine lives – despite worries about the international situation and job prospects," says Professor Peter Spencer, the Ernst & Young ITEM Club's economic advisor. "Why we should remain so confident, when US retail sales have fallen by 2.4 per cent – the lowest drop since records began in 1992 – is still a bit perplexing." Professor Spencer believes that strong leadership over the terrorist crisis from Tony Blair may have had an impact. But economic fundamentals are also bolstering confidence. The housing market is firm and interest rates continue to decline. The cost of debt service continues to fall, helped by competition in the personal loan markets, allowing people to carry an increasing amount of debt.
Even if GDP growth for the US in 2002 is zero – rather than the Ernst & Young ITEM Club's relatively optimistic central forecast of 1.3 per cent – it predicts that UK GDP growth would only be reduced to a mere half percentage point next year, with interest rates falling below 4 per cent for the first time since 1955. The Club also believes that Gordon Brown's expansionary spending policies (adding over one percentage point to growth next year) coincide conveniently – but arguably by happy accident – with this dark period in geo-political history.
Discretion as well as valour can be deployed
UK plc clearly has much to thank consumers for, says Professor Spencer, but "reward" – or further policy expansion – should err on the side of discretion for the moment. The world economies now face the risk of 'policy over-kill', says Professor Spencer, who urges policy makers in the UK and the US to defer any more stimuli pending a review of the position over the final quarter. A full quarter of post-atrocity data must be gathered and scrutinised before committing to more tax cuts and interest rate reductions, even for those economies in technical recession such as the US.
"Unlike the end of the Gulf War when consumer confidence was restored quickly, there may be no sense of closure this time, as the pursuit of the atrocities' perpetrators looks likely to be a long one. The uncertain nature of this situation makes policy flexibility critical and this can mean discretion as well as valour. Large fiscal injections into resilient economies would add to inflationary pressures and upset the bond markets. Nearly $200bn dollars have already been earmarked for the US economy. Policy makers should hang back from committing the really big money until the situation becomes a little clearer."
While it is impossible to speculate about the true position of economies on current available data, which reflects pre-war conditions, Professor Spencer says that the performance of the stock markets now gives a clue to likely improvement in mood: they are now back to where they were in the pre-atrocity environment of September 10. In the US, confidence and retail sales may bounce back as tax breaks and rate reductions work through. His concern about so-called policy overkill is based on historical precedents. "The US could be looking at a re-run of the 1987 UK episode if it is not careful," he says. He draws attention to the panic induced by the stock market crash of 1987, which triggered cuts in interest rates and income tax, fuelling an inflationary boom that exacerbated the 1990 recession.
Bank of England and Fed need to sit tight
"Thankfully, this scenario does not apply to the UK this time. We have not had a boom: saving rates have fallen but they are still at four per cent so we are not as vulnerable as we were in 1987. Interest rates can decline without fuelling inflation. But the Bank of England as well as the Fed need to sit tight to see how the world economic situation unfolds. Consumer confidence, the housing market and High Street sales will weaken in the face of corporate cutbacks but will be far from collapse. The Bank of England would be wise therefore to sit tight on the current 4.5 per cent base rate for the time being".
CBI CALLS FOR HALF-POINT RATE CUT AS EXPORT PROSPECTS FALL TO 21 YEAR LOW
The CBI last Wednesday called for a half-point cut in interest rates as its latest manufacturing survey showed export prospects worsened at the fastest rate for 21 years.
Fifty nine per cent of firms said they were less optimistic about export prospects over the year ahead, with just six per cent saying things look rosier, the CBI's latest Quarterly Industrial Trends survey reveals.
The resulting negative balance of minus 53 per cent compares with minus 25 per cent previously and is the bleakest picture since July 1980. This latest CBI survey is the first where all the responses came in after the terrorist attacks on September 11.
Business confidence fell to a three-year low. Some 60 per cent of firms said they are less optimistic about the general business situation, just six per cent said they are more optimistic. The negative balance of 54 per cent compares with minus 22 per cent in the last survey.
The CBI cautioned that confidence can be unduly influenced in the short term by dramatic events such as the terrorist attacks. But what is "deeply worrying" is that tangible indicators of orders, output, employment and investment intentions are declining at the same time.
"Business needs decisive and meaningful action to shore up confidence. This means the MPC must cut rates by half a per cent," said CBI Director-General Digby Jones. "The picture is extremely mixed but many sectors are experiencing the worst conditions since 1991.
"With the inflation outlook benign, there is ample scope for the Bank to lower rates and the economic situation justifies a half-point cut. Indeed, if the Bank was not to cut rates by half a point now it is difficult to think of a situation when it will," he added.
Domestic orders are expected to fall at the quickest rate since January 1991, with 37 per cent saying orders were down and 14 per cent saying they were up. Export orders are expected to decline at the fastest rate for 21 years. Prices were a relatively less important constraint on exports with political and economic conditions abroad gaining as a constraint.
Total orders fell over the past four months at the fastest pace for over two years. The outlook over the next four months is the worst for three years with 39 per cent expecting orders to fall and 14 per cent expecting them to rise. This overturns hopes expressed in the July survey of an end to falling orders.
Ian McCafferty, CBI Chief Economic Adviser, said: "The survey shows the main impact on the UK economy of the US tragedies is being borne by UK exporters. As a result, the imbalances in our two-speed economy are likely to worsen over the winter. However, an overall recession is unlikely as the resilience of the consumer sector will continue to provide support".
The pace of job cuts was slower than feared at the time of the July survey. But firms of all sizes and sectors expect numbers employed to fall at a faster rate over the next four months to add to the 125,000 net job losses in the sector during the year to August.
Predictions about the volume of output have also turned negative, with a minus balance of 23 per cent saying output will fall compared to the situation in July when optimists actually outweighed pessimists.
Manufacturers' plant and machinery investment intentions deteriorated further and were the most negative since April 1999. The main reason for not investing is uncertainty about demand, which is more of a constraint than any time since 1979.
This is the first time for three years that the CBI has called for a half-point cut in interest rates. The survey was conducted between September 20 and October 10 and 1020 manufacturers responded. Sterling averaged DM 3.13 and $1.47 compared with DM 3.24 and $1.41.
HEWITT SAYS DOHA WILL HELP STRENGTHEN WORLD COMMUNITY
Trade and Industry Secretary Patricia Hewitt last week said the launch of a new trade round at Doha is essential if world governments are to continuing working together effectively as an international community.
The World Trade Organisation has scheduled a ministerial meeting on 9 - 13 November at Doha, Qatar to agree new international trading agreements.
Ms Hewitt was talking to the Royal Institute of International Affairs in London.
She said:
"Since the appalling terrorist acts of 11 September we will be more determined than ever that we succeed in launching a new trade round at Doha.
"In attacking the World Trade Centre in many ways the terrorists attacked the very symbol of the world economy. Part of our response to this attack must be to strengthen world trade.
"After the second world war, the European Community brought together countries in Europe for stability and peace through trade. Now the nations of the world must work through the WTO to create a stable, peaceful global community."
Ms Hewitt also said that the UK's multi-cultural business community would contribute to the UK's readiness to contribute and benefit from increased global trade links.
She said:
"People of all nations of the world not only build their home in Britain - they build their business. And these businesses provide us with our strongest trading bridges. Because they bring an understanding of the culture and aspirations of different countries and they have the language to build first class trading relationships."
FSB CALLS FOR SWIFT GOVERNMENT RESPONSE TO BANKING INQUIRY
The Federation of Small Businesses (FSB) has called on Patricia Hewitt, Secretary of State for Trade and Industry, not to delay publishing her Department's response to the Competition Commission Report on the provision of banking services to small businesses, that was presented to the DTI last week.
The inquiry report was originally referred to the Competition Commission as a result of Don Cruickshank's banking review in March 2000. Cruickshank argued that a "complex monopoly" existed in small business banking where over 80% of accounts were held by the four main high street banks.
John Walker, FSB Policy Chairman said "the Competition Commission Report has already been delayed by 4 months. We are calling for the initial findings to be made public by the end of November, and for any measures to be introduced without unnecessary delays. It is a long time ago that Gordon Brown originally asked for these issues to be looked at in 1998."
An interim report published by the Commission in March 2001 suggested possible remedies. These included a windfall tax to reduce profits, regulation of the costs of business banking, and removal of the barriers to switching banks.
John Walker added, "Cruickshank said that consumers were paying between three and five billion pounds a year too much for their banking but we don't believe a windfall tax is the answer. Any such levy would be passed on to small businesses in higher banking charges."
The FSB is calling for:
Opening up the small business banking market to foreign banks.
John Walker said: "We hope that the Competition Commission is brave enough to be as forthright as Don Cruickshank but whatever the results we will keep working to get a fair deal for small business customers. Some improvements have already been made as a result of this pressure. Nigel Griffiths, the Small Business Minister, has assured us that he will work hard to ensure that banks do not "pull the plug" on businesses going through temporary difficulties. We are also working with the British Bankers Association (BBA) to make the comparison of bank charges easier."
The FSB is the largest organisation representing small businesses with 168,000 members. More information is available at www.fsb.org.uk
For more information on Don Cruickshank's banking review see www.bank.review.org.uk. The Competition Commission's interim report in March 2001 is at www.competition-commission.org.uk
The Information Commissioner has issued new guidance to help those holding personal information (data controllers) stay within the law.
The free publication 'The Data Protection Act 1998 - Legal Guidance' replaces 'The Data Protection Act 1998 - An Introduction' which was published in October 1998.
This latest publication sets out the changes to the Act and will serve as a reference document for data controllers and their advisers. It will be further developed over time, increasing its detail and authority.
The new guidance has been issued at the end of the first transitional period when most of the requirements of the 1998 Data Protection Act come fully into force. It provides guidance on all the major provisions of the Act, including the Commissioner's duty to assess whether particular processing is likely or unlikely to be in compliance with the Act.
The guidance also takes account of the provisions of the Human Rights Act 1998.
Elizabeth France, Information Commissioner said, "I trust this guidance goes some way towards answering data controllers' most frequently asked questions and that it will be a valuable starting point in helping them to achieve compliance with the Act."
Copies of 'The Data Protection Act 1998 - Legal Guidance' can be downloaded from the Information Commissioner's website: www.dataprotection.gov.uk or requested, free of charge, from: Publications, Information Commissioner's Office, Wycliffe House, Water Lane, Wilmslow, Cheshire SK9 5AF.
Key changes to the Data Protection Act 1998 from 24th October 2001
At the end of the first period of Transitional Relief most of the requirements of the DPA 98 come fully into force. This brief paper highlights the key changes.
Manual Data
Subject to an extended period of limited relief, in particular in respect of data quality, until 2007 in respect of data which existed as of 24 October 1998 manual data (basically paper records) will become fully subject to the Act. Individuals will have a right of subject access to any manual data not covered by an exemption. Though the precise interpretation of a 'relevant filing system' is difficult our general advice would be that organisations that hold manual records that relate to individuals which they consult and use for their own business purposes should assume that such records will fall within that definition and are caught by the Act.
NB Notification is not required in respect of manual (ie non-automated) data.
Personal data
The 1984 Act only applied to personal data that were 'processed by reference to the data subject'. Broadly this meant that where a name was incidental, eg the name of a particular official or function holder within an organisation which might appear in a meeting record etc, that name, though clearly personal data, was not subject to the Act. This qualification disappears. This means that, for example, a data controller that processes the name of a particular member of staff in order to identify the relevant officer within the organisation to contact on a particular matter will be processing personal data subject to the Act. This may have significant implications in respect of subject access.
Subject access
Data subjects should not only be provided with a copy of data about them they should also be told the purposes for which the data are processed, any information available as to the source of the data and a description of those to whom the data have been or may be given.
General
The first principle requirement that all processing must satisfy a condition in Schedule 2 and that the processing of sensitive data must also satisfy a condition of Schedule 3 will apply.
The requirement in the seventh principle that processing carried out by a data processor on behalf of the data controller must be carried out under a written contract imposing obligations to take appropriate security measures as well as to act only upon the instructions of the data controller comes into force.
The eighth principle requirement that personal data should only be transferred outside the EEA where there is adequate protection for those data will apply.
Individual rights
Various additional individual rights come into force including;
Further, compensation can be claimed in respect of damage caused by the failure of the data controller concerned to comply with any of the obligations of the Act.
Exemptions
A number of exemptions disappear. Perhaps the most significant one is that which applied to 'back-up data', that is data which are processed only for the purpose of replacing other data in the event of the latter being lost or destroyed. The subject access exemption to such data disappears.
Full details of these changes are set out in 'The Data Protection Act 1998 - Legal Guidance' which is available on the Information Commissioner's web-site: http://www.dataprotection.gov.uk
GETPAID INTRODUCES GETPAID 7I FOR INTERNET BASED RECEIVABLE MANAGEMENT
The GetPAID® Corporation, a leading supplier of receivable management software and services, has announced the availability of GetPAID 7i, for Internet based collections and dispute resolution.
“GetPAID 7i revolutionizes how companies handle their accounts receivable,” comments CJ Wimley, senior vice president product planning and development at The GetPAID Corporation. “With the release of GetPAID 7i, credit professionals have a fully scalable, Internet based collection and dispute resolution system that can be easily deployed to many users in any location.”
With GetPAID 7i, deployment can occur from a single location, allowing companies to rollout and maintain the solution for a wide range of users both domestically and internationally. GetPAID 7i is an n-tiered, Java 2 Enterprise Edition (J2EE) compliant solution with robust cross-platform support, straightforward integration of multiple disparate data sources; and faster run-time performance.
Worldwide Receivable Management
“GetPAID 7i provides you with easier deployment of the application throughout the enterprise,” states Wimley. “By centralizing the configuration, maintenance and execution of GetPAID on an application server, or servers, companies can exploit the Internet to deliver our robust collection functionality to all users within their organization regardless of where they are located.”
GetPAID offers 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. With this functionality, 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 of dollars in past due receivables. GetPAID is based in Parsippany, NJ, with offices worldwide.
The GetPAID product line includes advanced collection and dispute resolution systems with multiple currency and languages for global use, a powerful report writer, and a web-enabled product.
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, visit www.getpaid.com
NCM STATEMENT ON ECONOMIC SLOWDOWN
Amsterdam, 24 October 2001 - International credit insurer NCM, which protects more than 172 billion euros of world trade each year against the risk of non-payment, is seeing a sharp slowdown in the world economy since the start of 2001 - in line with its previous predictions.
Earlier this year NCM forecast a sharp deceleration in the US economy which would impact on Europe and elsewhere. It now continues to see a decline in certain sectors, not only in the US but also in Europe. The IT and telecommunications industry which has driven growth for the past two to three years, is currently stagnant. Financial problems in the economies of Turkey, Argentina and Brazil are worrying.
Gerard van der Stelt, Chairman of the Managing Board of NCM says: "A premium rise is unavoidable. We expect the number of claims to rise substantially in the coming period. Collection cases have increased by 20% in the first nine months of this year compared to the same period in 2000. Late payers are on the increase, with overdue payments going up by approximately 20 per cent. At the same time, the tightness of the reinsurance market has caused reinsurance rates to increase significantly. The balance between the risks we face and the premium income we receive is being lost. Credit insurance premium rates have decreased by at least 50% in the past decade, but our costs are greater than ever. It will be necessary, in some cases, to increase our rates by 20 to 30 per cent.
"Well before the appalling Manhattan attack, the risk map of the world was being redrawn. Trade risks have become increasingly volatile, often appear unexpectedly and, given the interdependency of trade sectors and economies, impact quickly worldwide.
Payment delays and bankruptcies have been increasing over the past year, fuelling fears that 2001 may well turn out to be the most significant year in the past decades in terms of a changed scenario on the cost and availability of global credit.
"The risk of a recession in the US and elsewhere has been a possibility for some time but has been heightened by the New York disaster. The current volatility and unpredictability in the economic climate will be greatly increased by what has happened. There will be increased trade risks in vulnerable sectors and, as bond markets and bank credits start to get tighter, trade credit will become more important.
"NCM, which has an excellent track record of reacting to crises, is totally confident our reinsurers will continue to support us (none on our treaty will disappear as a result of 11th September claims) just as we will continue to support our customers. However, this requires responsible behaviour by us as a risk carrier and responsible action does mean we will need to increase rates in order to ensure the continued availability of insurance cover."
D&B RECEIVABLE MANAGEMENT SERVICES REPORTS STRONG REVENUE RESULTS
Collection Trends Stabilize After September 11, Expansion Plans Moving Forward
Dun & Bradstreet Receivable Management Services (D&B RMS) reports revenue and earnings growth were strong in the quarter ending September 30, 2001. Revenue increased by 30% and EBITDA (earnings before interest, taxes, depreciation and amortization) increased at a higher rate than revenue. For the nine months ended September 30, revenue was $95 million, 24% higher than prior year.
In addition, collection trends are essentially returning to levels seen prior to the September 11 attacks.
"In the days following September 11 there was an impact on revenue from the interruption of postal and express deliveries, and a suspension of call activity into areas closest to the tragedies," said David Huebner, President and CEO of Dun & Bradstreet Receivable Management Services. "Even with this situation, the month of September and the quarter ending September 30 both exhibited significant growth over prior year. Trends in October are also strong."
D&B RMS, as a result of its growth, is continuing plans to invest and expand its business. This includes capacity expansion with a new call center in Tucson, Arizona, and a significant investment in web-enabling technology.
According to Forrest Old, executive vice president, D&B RMS, "D&B RMS provides accelerated cash flow to companies. Our two core businesses of providing pre-charge off receivable outsourcing and debt collection are vital to a customer’s financial position." Old said that the outsourcing and debt collection businesses exhibited significant growth in the third quarter.
Dun & Bradstreet Receivable Management Services is the largest business-to-business receivable management company in the world, with operations in the U.S., Canada and Hong Kong. Additional information about Dun & Bradstreet Receivable Management Services is available at www.dbrms.com
The Secretary of State for trade and Industry has today presented a petition in the High Court to wind up in the public interest Sussex Insurance Services Ltd, following investigations by Companies Investigations Branch of the DTI under Section 447 of the Companies Act 1985 (as amended).
Sussex Insurance Services Ltd purported to sell motor insurance, but was unauthorised to do so.
Any person who has arranged motor insurance cover with Sussex Insurance Services Ltd. should be aware that their cover may not be valid, and they should take steps to reinsure their vehicle immediately.
The Financial Services Authority can advise on suitable sources of alternative insurance cover. Contact the FSA Consumer Helpline, Tel: 0845 606 1234 (during office hours only).
On the application of the Secretary of State the court appointed the Official Receiver as provisional liquidator pending the hearing of the petition on 5 December 2001 at 10.30am.
The registered office of Sussex Insurance Services Ltd, is:
Unit 450
9 Western Road
Brighton
East Sussex
BN1 2NW
The trading address of the company is:
Maritime House
Basin Road North
Hove
East Sussex
BN41 1WR
Petitions to wind up the companies were presented on 19 October 2001 and followed investigations carried out by the Department's Companies Investigation Branch (CIB) under section 447 of the Companies Act 1985. This enables investigators to require a company to produce its records. If it is in the public interest the Secretary of State may use the information obtained to petition the Court to wind up a company or to disqualify the company directors.
The Official Receiver was appointed provisional liquidator of Sussex Insurance Services Ltd on 19 October 2001. The Official Receiver's role is to protect and preserve the assets and financial records of the companies until the hearing of the petitions.
All public enquiries concerning the affairs of Sussex Insurance Services Ltd. Should be made to the Official Receiver at
The Insolvency Service
Public Interest Unit
PO Box 203
21 Bloomsbury Street
London WC1B 3SS
BYERS OUTLINES PROPOSALS FOR STRUCTURE AND FUNDING OF COMPANY LIMITED BY GUARANTEE
Transport Secretary Stephen Byers on the 23 October 2001 outlined to Parliament (in a written Parliamentary Question) his proposals for the structure and funding of a company limited by guarantee, which he will propose to the administrators of Railtrack Plc as being suitable to take over Railtrack Plc's role as operator of the railway network.
Mark Hendrick MP (Preston)
To ask the Secretary of State for Transport, Local Government and the Regions if he will make a statement on the likely structure and funding of the Company Limited by Guarantee which he will propose should take over Railtrack PLC's role as Network Operator.
Rt Hon Stephen Byers MP (North Tyneside)
It is ultimately for the administrator to assess and make recommendations on proposals for how Railtrack's railway assets are transferred out of administration as a going concern. I will have to approve any such transfer under Schedule 7 of the Railways Act 1993. As recent press coverage has made clear, there is every possibility that there may be more than one proposal before the administrator. The Government welcomes this. At the same time however, it would be irresponsible of us to do nothing and leave it to others to work up a viable successor company to Railtrack PLC. We are therefore developing what we would regard as an attractive successor vehicle. We will put a proposal to the Administrator for a Company Limited by Guarantee (CLG) to take over Railtrack PLC's railway assets and its role as Network Operator.
A CLG would be a private sector company run on purely commercial lines but without shareholders and consequently without the need to pay dividends in return for equity funding. Profits from the company would be re-invested in the network. The CLG structure could do much to address the current problems of the industry and could be one way of facilitating increased vertical integration with the possibility of individual TOCs playing a greater role in the maintenance of specific areas of infrastructure, where this was advantageous and appropriate. Any such vertical integration would need to include measures to protect the interests of other infrastructure users.
We anticipate that the board of the CLG would comprise 12 to 15 executive and non-executive directors. The executive directors would include a CEO, and engineering, finance, safety and commercial directors. The non-executive directors could include a chairman, one director nominated by the SRA, one director appointed after consultation with both the TOCs and FOCs, and up to seven other independent non-executive directors. As is the case with all companies, the directors would owe their first duty to the CLG itself.
This would be a highly professional board, tightly focussed on delivering a quality rail network fit for the 21st Century, remunerated and incentivised accordingly, and with corporate governance structures comparable to that of a traditional PLC. In its early years the company would clearly face a number of key challenges: maintaining very high standards of safety on the railway; retaining the confidence of customers, employees and contractors; diagnosing the cultural and structural problems of the company and planning the best way of overcoming them.
We are confident that incentive packages can be devised which would be comparable with those for similar roles elsewhere in the private sector and which would ensure that the CLG recruited and retained the very best people. Incentives would be based initially on safety, meeting financial and efficiency targets, and providing a quality service to customers.
Instead of shareholders, a CLG has members. The SRA would be the founder member of this CLG and we anticipate that the majority of the other members would come from the private sector. Individuals drawn from private sector companies with a direct stake in the railways, other interests including passenger groups and employees, and the SRA (or its successor) could all be possible members. Financial interests and construction companies could also be included.
Under this structure the members would have a governance role equivalent to that of shareholders but would have no additional powers. They would be well placed to ensure the high performance and full accountability of the board.
For funding purposes the CLG would have the same sources of revenue as Railtrack had: property income, track access charges and grant. Some 90% of the company's income would therefore be covered by stable long-term contracts. Revisions to these contracts, for example to reflect any changes to the regulatory regime, would be subject to independent regulation in respect of the fair price to be paid for the outputs Government wishes to purchase.
The CLG would not need equity to raise debt finance. The company would have the existing debt from Railtrack transferred to it and would be able to borrow further from the debt markets to the extent necessary. The cost of this borrowing would depend on the company's credit rating and under the proposals we are currently developing we would expect the CLG to have a solid investment-grade (i.e. at least BBB) credit rating. We anticipate that in practice lenders would view the company as a very low credit risk and a sound basis for their investment.
The 'cushion' between the risk of poor financial performance and debt providers that equity would provide under the standard PLC model would come from two main sources. First, we would expect to put in place an arrangement by which the company could access a standby, subordinated loan facility. This facility would be enshrined in a contract, providing explicit support in specified circumstances up to a predetermined limit. It would be capped. It would not amount to a government guarantee of debt, but the repayment of this facility would be 'last in the queue' of creditors for repayment. The possible value of this facility would be determined once the administrator has a better understanding of Railtrack plc's true financial position.
Second, although the company would not be distributing profits in the form of dividends, it would earn a surplus over direct costs. This would be sufficient over time to build up a significant reserve. Together, the company's reserves and the explicit loan facility, would mean that the CLG would have access to sufficient funds to cover foreseeable circumstances.
Under the CLG structure revenues would go further than they would have done with Railtrack. The cost of capital would be lower, there would be no dividends and the company would be able to prioritise cashflows in favour of lenders. In addition the company would operate with much lower risks than Railtrack, concentrating on operating and maintaining the infrastructure as well as undertaking small-scale renewals. The CLG would not undertake major new projects with all their attendant risks of cost overrun. As we announced in April this year, we anticipate that projects such as these, like the East Coast Main Line upgrade, will henceforward be undertaken by Special Purpose Vehicles. These are likely to be bespoke joint venture companies financed by a combination of Government grant and private sector debt and equity.
A CLG company structure could be combined with a different, more streamlined, regulatory regime than the one under which the industry has had to labour to date and this would help to underpin its credit rating. As stated above, transparent independent economic regulation would continue to be an element in the regulatory regime.
There may well be other viable options for the administrator to consider, and we will give any transfer scheme put to us full consideration. Nevertheless, we are confident that the CLG structure we are proposing, along with the associated regulatory changes, would:
HOLIDAY COMPANIES TOLD TO PACK THEIR BAGS
High Court winds up 'freebie' holiday companies which promised more than they could deliver
Two holiday companies that promised 'free' luxury holidays to thousands of people but delivered less than 30, have been wound up in the High Court, following a DTI investigation.
Incentive Marketing Limited and Holidays Direct Travel Limited - better known as 'Holidays Direct' or 'Holidays Direct Promotions' - persuaded 65,000 people to part with an 'administration' fee of £29.50 for holidays in Spain, Portugal and the Canary Islands.
Counsel for DTI, Nicholas Caddick estimated that £3.5 million had been sent to the companies, but only £1.179 million had been accounted for.
"This was obviously a highly profitable venture for those involved in the company, but a very unsatisfactory one for the public," said Mr Caddick, who revealed that as at September only 25 people had received holidays.
Holidays Direct, which traded from addresses in Longnor, near Buxton in Derbyshire and Bournemouth in Dorset, sent 'prize letters' and brochures to members of the public announcing that recipients had won 'top prize' in a competition - guaranteeing free flights and holiday accommodation for two in luxury apartments.
The unsolicited letters included a certificate entitling the recipient to a holiday within 18 months, providing certificates were returned within 7 days - and accompanied by the administration fee.
The companies were wound up in the public interest on the basis that:
- The holiday promotion scheme was unsatisfactory - members of the public were persuaded to part with money on the promise of free holidays that very few of them have received and are likely to receive.
- The companies attracted a response and payments from members of the public on the basis of untrue or misleading documents containing untrue or misleading promises or assurances.
Melanie Johnson MP, Minister for Competition, Consumers and Markets, said:
"Today's judgement will be some comfort to the many people who have lost money to know that this firm has been put out of business once and for all.
"This case has certainly attracted a great deal of attention and many people have been involved. I am glad that no-one else will lose out from now on.
"The minority of businesses who think they can get away with deliberately cheating the public should take note - we are not prepared to let you get away with it, and will do everything we can to stop you."
The bulk of the holiday offers were sent out during August, when 55,000 people received letters. All the 'winners' were offered holidays in the same apartment complex - with a capacity of 57 apartments - and given a choice of only 4 departure dates in November, leaving from Gatwick.
Petitions to wind up the companies were presented on 7 September 2001 and followed investigations carried out by the Department's Companies Investigation Branch (CIB) under Section 447 of the Companies Act 1985. This requires a company to produce its records. If it is in the public interest the Secretary of State may use the information obtained during the investigation to petition the Court to wind up the company in the public interest. Such action can also result in the subsequent disqualification of the company's directors.
The Court appointed the Official Receiver provisional liquidator of Incentive and Direct Travel on 7 September 2001. The Official Receiver's role was to protect the assets and records of the companies until the hearing of the petitions.
Incentive Marketing Limited t/a 'Holidays Direct Promotions' - Incorporated: February 1999; Address - Registered Office:Rock House, Market Square, Longnor, nr Buxton, Derbyshire SK17 0PG; Director: Clinton Thompson; Secretary: Roger Pickering.
Holidays Direct Travel Limited t/a 'Holidays Direct Promotions' - Incorporated: 17 October 2000; Address - Registered Office: 200 Old Christchurch Road, Bournemouth, Dorset BH1 1PD; Director: Legal Directors Limited; Secretary: Legal Secretaries Limited.
The companies' business and or use of the corporate name have been inextricably interwoven and without clear demarcation. Trading has occurred from Rock House, Longnor, Old Christchurch Road and 43 Long Causeway, Farnworth Bolton. The companies have also used a number of 'mail box' addresses and their most recent trading address was Millbrook House, Roundthorn Industrial Estate, Wythenshawe, Manchester M23 9YJ.
The officers of Incentive Marketing (Messrs Thompson and Pickering) failed to co-operate with the enquiry. Direct Travel failed to record the true identity of the persons controlling the company.
Neither company produced adequate accounting records and their affairs were inextricably interwoven. Persons not appointed officers of the companies also controlled the company's bank accounts.
Others identified as being in control of the Incentive and or Direct Travel business (or aspects of it) and or their finances were:
The petitions were presented under Section 124A of the Insolvency Act 1986 on the ground of public interest.
All public enquiries concerning either company should be made to:
THE OFFICIAL RECEIVER
Public Interest Unit
21 Bloomsbury Street
London WC1B 3SF
Public Enquiries: 020-7215 5000
Textphone (for people with hearing impairments): 020-7215 6740
http://www.dti.gov.uk
'HOLIDAYS DIRECT'
Incentive Marketing/ Holidays Direct Travel have no association with the concern which trades as 'Holidays Direct' and has a web site at www.Holidays-Direct.co.uk
This business is the trading name of Midlands Co-operative Society Limited of Central House, Hermes Road, Lichfield Staffs WS13. 6RH, a fully bonded business with ABTA and the CAA.
*** 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 1.42 1.45 Canada 2.25 2.27
Austria 22.03 22.04 Portugal 320.99 321.25
France 10.50 10.51 Belgium 64.58 64.64
Finland 9.50 9.52 Italy 3100.17 3102.66
Germany 3.13 3.13 Sweden 15.23 15.18
Holland 3.52 3.53 Switzerland 2.36 2.37
Spain 266.40 266.62 Ireland 1.26 1.26
Australia 2.79 2.83 Denmark 11.90 11.91
Hong Kong 11.12 11.37 Euro 1.60 1.60
Africa Com 13.63 13.51 Saudi Arabia 5.34 5.44
India 68.47 69.73 Malaysia 5.41 5.51
Singapore 2.60 2.64 Norway 12.73 12.75
Japan 174.96 176.21
TW This week LW Last week.
Profits at Exxonmobil, the world's biggest publicly-traded oil company, fell by 23% in the third quarter.
Fujitsu announced losses of GBP175 billion ($1.4 billion) in the six months to September.
Honeywell lost $308m in the third quarter after restructuring costs of $1 billion.
Lucent Technologies, the American telecoms-equipment maker, reported losses in the latest quarter of $8.8 billion.
Sony reported a second quarterly loss, of GBP13.2 billion ($111m), in the three months to September.
Viacom, the American media giant that owns CBS, MTV and Paramount Pictures among others, announced a net loss of $190m in the third quarter.
Xerox announced a fifth consecutive quarterly loss, of $211m, slightly more than a year ago.
Debenhams, the department store group, announced pre-tax profits of 146.1 million pounds, on turnover of 1,613 million, for the fifty three weeks ending 1st September 2001. Earnings per share stand at 27.9p.
GlaxoSmithKline, the pharmaceuticals company, announced pre-tax profits of 3,181 million pounds, after exceptional charge, on turnover of 14,873 million, for the nine months ending 30th September 2001. Earnings per share stand at 34.3p.
Jarvis Porter announced pre-tax losses of 8.5 million pounds, after exceptional charge, on turnover of 23 million, for the six months ending 31st August 2001.
Westbury, the housebuilder, announced pre-tax profits of 31.9 million pounds, on turnover of 264.9 million, for the six months ending 31st August 2001. Earnings per share stand at 20.1p.
MERGER NEWS
The Secretary of State for Trade and Industry has decided, on the information at present before him, and in accordance with the recommendation of the Director General of Fair Trading, not to refer the following merger/s to the Monopolies and Mergers Commission under the provisions of the Fair Trading Act 1973:Proposed acquisition by Associated British Foods plc of assets of Kerry Group plc, namely the SPP ingredients business of Kerry Ingredients UK Limited
Completed acquisition by NTL Group Limited of certain assets of Viatel Global Communications (UK) Limited and Viatel UK Limited
Completed acquisition by Abbot Group Plc of Deutsche Tiefbohr-AG
Proposed acquisition by Bridgepoint Capital Limited, through the Tiger Group, of WT Foods Plc
KODAK PROCESSING COMPANIES LTD/COLOURCARE LTD MERGER INQUIRY REMEDIES STATEMENT
The Competition Commission (the Commission) has sent remedies letters, on a purely hypothetical basis, to the main parties, Kodak Processing Companies Ltd (KPCL) and ColourCare Ltd, in its inquiry into the acquisition of certain assets of ColourCare by KPCL.
The Commission has as yet reached no conclusions on any matter, in particular as to whether the acquisition of ColourCare by KPCL operates or might be expected to operate against the public interest. However, if the Commission reached any adverse findings on the acquisition, it would wish to make appropriate recommendations for remedies to the Secretary of State. This statement of hypothetical remedies is being made public to inform all interested persons, should they wish to comment or to raise further points with the Commission. In particular, comments are invited on the likely effectiveness, costs and practicability of the remedies that have been set out.
Any such comments should reach the Commission by Monday 29 October.
The Commission invites views on two possible remedies:
prohibition of the proposed acquisition, or
the proposed acquisition being conditional on the divestment of one or more of KPCL's and/or ColourCare's laboratories and associated businesses relating to specific services or to parts of the UK where adverse effects may be identified.
The reference was made by the Secretary of State for Trade and Industry, under sections 64, 69(2) and 75 of the Fair Trading Act 1973, on 16 August 2001. The Competition Commission will submit its report to the Secretary of State by 26 November 2001. It will subsequently be published.
This inquiry is being undertaken by a group of five Commission members. The Chairman is Professor Paul Geroski, a Deputy Chairman of the Commission, who is also Professor of Economics at the London Business School. The other members are Mrs Sarah Brown, a former DTI Civil Servant, who is a member of the Friendly Societies Commission and a director of the Financial Services Compensation Scheme; Miss Judith Hanratty, a barrister who is Company Secretary of BP AMOCO plc and a member of the Takeover Panel; Mr Tim Richmond, a chartered accountant, and Mr Jeremy Seddon, a former merchant banker.
Further information can be obtained from the Commission's website at http://www.competition-commission.org.uk
An increasing number of people are turning to the internet in a bid to protect their ideas and inventions according to the Annual Report and Accounts of the United Kingdom Patent Office (2000/2001) which was published last week.
There were more than 125,000 hits every day on the Patent Office web site (up from 50,000 last year) from people wanting to find out how to protect their ideas and inventions, download forms and information, and learn about the latest innovations in patents, designs, trade marks and copyright issues.
Applications for trade marks rose significantly to more than 100,000 (up by 22% on the previous year) and led to 76,290 registrations. Demand for patents also increased to more than 31,000 while design registrations rose to 9,380.
Trends
Competition and Consumer Affairs Minister Melanie Johnson said:
"Intellectual Property tools offer business the protection it needs to turn bright ideas into products and services. This benefits business, the economy and consumers.
"This area is a key element in promoting strong and competitive markets and I thank the Patent Office for all their hard work this year."
Alison Brimelow - Chief Executive of the Patent Office, said:
"With the increasingly high profile of Intellectual Property and the demands such interest brings with it, we work ever harder to improve the accessibility, openness and responsiveness of our services to our customers. The Quinquennial Review gave us a comprehensive health check and I am pleased to say that it recognised how very customer focussed and responsive we are.
"It also recognised that our role is evolving from regulator to enabler. Yes, we are in the business of granting rights and it is important that we continue to do this well, but simply operating within a regulatory framework is not enough. We must act as an enabler and develop partnerships with key influencers in the Intellectual Property field. With these partners we will work to raise awareness and understanding of Intellectual Property opportunities among UK industry, commerce and academia."
The Patent Office has also met its new targets on customer service, finance and efficiency. These targets were tightened at the beginning of the year following consultation with customers.
The Patent Office Annual Report and Accounts is available on the Patent Office web site at http://www.patent.gov.uk/about/reports/index.htm It can also be purchased from the Sales Office of the Patent Office, Concept House, Cardiff Road, Newport, South Wales NP10 8QQ and from The Stationery Office.
Tuesday 30 October Collections 2001 Credit Today National Motorcycle Museum, Birmingham The inaugural Credit Today conference for the UK on Debt Management, Collections Procedures as well as the political issues and regulatory changes affecting your work For more details contact Carleen Bennett on 020 7407 4700 or visit www.credittoday.co.uk Tuesday 6 November ICM Credit Scotland 2001 The National Stadium, Hampden Park, Glasgow, G42 9BA Cost #50.00 including Buffet Luncheon and Refreshments E-mail carol_myers@hotmail.com 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 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