Financial & Corporate Recovery News

Fresh Fears for the Dying British High Street?

A dark cloud is hovering over the British high street in 2013, according to research, with 2012's financial misery already rolling over into this financial year. At the heart of the problem lies a range of serious financial issues which are facing at least 140 retailers.

Corporate Recovery

Begbies Traynor, a law firm specialising in the field of corporate recovery, has already claimed that in 2013 there will be a rising number of retailers in the high street facing a worrying and uncertain financial future.

This research looks at companies experiencing a range of 'financial distresses'. Even more worryingly, a number of these retailers are at the top of their yearly cash cycle, which means that they should, in theory, be experiencing their best cash position of 2013. 

You can read the full article from Begbies Traynor.

Market Challenges & Financial Distress

Retailers have been hit by various factors causing market challenges & financial distress in 2012 which have depressed their sales. These include wider economic problems and even the prolonged period of wet weather.

This has led to 140 UK retailers - from large national chains to small single-unit outlets - being added to the financial 'critical list' of Begbies Traynor. The Corporate Recovery firm believes that retailers on this list will not be able to survive over the next year, at least in their current operating form.

Certain sectors of the retail industry are experiencing particular financial pressure, such as independent chemists, off-licences and book retailers, who are all under particular pressure from large supermarkets and online retailers. The Corporate Recovery firm has also warned that their list is just the tip of the iceberg, with thousands of specialist and small retailers desperately struggling to survive in the current climate of austerity.

The impact of online shopping has also continued to affect the financial status of high street stores. Book stores typically have peak sales in the Christmas run-up, but consumers are increasingly using traditional book stores to simply browse and identify the titles they want before purchasing them online at a cheaper price. The book retail sector has also had another financial hit by the introduction of e-readers.

Financial Pressure and the Show-Rooming Trend

The latest consumer trend has been dubbed 'show-rooming' and it describes the growing tendency of customers to visit high-street retailers simply to test out a product, before using their digital device to find the best possible price online and purchase it. British shoppers may be becoming savvier with their purchasing but the financial impact is damaging the British economy.

Will Consumer Options & Financial Education be the death of the British High Street?

It is natural for customers who are increasingly cost-conscious and are also rapidly educating themselves about the benefits of online shopping and price-comparison websites. Even those who don't shop online are heading away from the high street and going to single-stop department stores and supermarkets, where they can buy the bulk of their products in one go and benefit from the perceived value of buying from a single retailer. Other factors include a rise in town-centre parking and travel costs, which are further discouraging shoppers from browsing in their local high street.

What Next for the UK's Ailing High Street?

The retail quarterly rental payment day fell on Christmas Day in 2012 and many will have found that this coincided with customers spending less, even in the January sales. This could put many new retailers under pressure and even drive up the number of insolvencies. Following the news that HMV is going into administration, this certainly seems to be the case. Market analysts and retailers will be viewing the next few months with trepidation as they hope to see some signs of a return of customers to the high street in the spring.

Is there any light ahead for the British high street or is are financial situation on a downward spiral, with corporate recovery firms being kept busy in the year ahead.

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Tory big beast warns markets will think electorate is ‘ridiculous’ if it ushers in a hung parliament tomorrow FINANCIAL markets will think voters are “slightly ridiculous” if tomorrow’s general election results in a hung parliament, Ken Clarke said yesterday.In an exclusive interview with City A.M., the shadow business secretary said: “My message to voters is this: get serious… you really ought to make a choice between the two credible governments on offer.”The former chancellor, who said the financial crisis demanded “a strong government with the authority to take some difficult decisions”, warned that markets would punish voters if no party wins an overall majority.“The idea of negotiations with Lib Dems, Scottish Nationalists, Ulstermen and so on fills me with horror. I think our creditors outside the United Kingdom would regard the electorate as slightly ridiculous if they plunge us into such a problem,” he said.Clarke warned there would be a “political crisis” if the Tories were forced into coalition talks with the Liberal Democrats or minority parties.He said: “We’d have an economic crisis coupled with a political crisis. The bond markets are going to be open from 1am. If that isn’t a warning signal to the public, I don’t know what is.”Clarke said he respected Lib Dem leader Nick Clegg, who “is probably more of a Conservative than he is a Liberal Democrat sometimes”, but warned his party would descend into internal warfare over who to prop up in the event of a hung parliament.“Their followers are largely people who don’t want to be involved in government of any kind, with either of the political parties. They would be unable to agree among themselves who they might support,” he said.He added: “They have a laughable constitution in which a Liberal assembly would have to be held to approve any arrangement. I wouldn’t ask a Liberal assembly what day of the week it is, and I certainly wouldn’t give it a powerful position of control over the formation of the government in an economic crisis.”Clarke has consistently warned a hung parliament will spook bond and currency markets, pushing up the cost of government borrowing and depressing sterling.“I remember the Lib-Lab pact [of 1974] and it was a farce. At the end of it, we were in another position of huge government debt ,” he said.

Today’s YouGov poll for the Sun puts the Tories on 35 per cent, with Labour on 30 and the Lib Dems on 24. If repeated tomorrow, that would make Labour the largest party in a hung parliament.

My daily lunchtime visit to the BBC website usually serves up some educational, informative and entertaining tidbits to share around the office; can anyone else believe that it is the 25th anniversary of the .com domain? 

www.news.bbc.co.uk/1/hi/magazine/8568509.stm. 

I must confess that I struggle to recall QKL.com, Boxspark or Beenz.com as serious contenders for my browsing time however what is taking up a great deal of our time here is how we are looking to engage Clients and Candidates with new social media.    

Perhaps here at CSC we have taken for granted how social networking and its impact on recruiting is creating one of the largest changes in dynamics in how we interact with the people important to the success our business. Web 2.0 is empowering candidates and clients like never before, giving the less scrupulous amongst us nowhere to hide.     

The job seekers and Companies (even the BBC and MI6 are in on it) are beginning to lead the way in how they want to engage with, and as employers.  Never hearing back from your applications, interviews or recruitment agencies for most has been a standard experience, fed up with that? Let the online world know with Twitter, Linkedin and Facebook providing high profile forums to vent your frustrations or recommend services to others.   

This is what we are making our little project here at CSC, how to effectively engage you and how to get your feedback on us.  Its all green shoots stuff for us here in the office, something that we are looking forward to getting hands on with but more importantly having fun playing with to see what works best.  

Any suggestions? Feel free to get in touch, find us on twitter and Linked in we don’t have anything to hide!   

Fancy a couple of suggestions as to how we can help you find your new role? Get in touch – it’s what we do

The improving economic climate has seen the funds of the UK's final salary pension schemes move into a surplus for the first time in nearly two years.Figures from the Pension Protection Fund (PPF) revealed that the 7,400 pension schemes achieved a collective surplus of £0.3 billion in March.This compares with a deficit of £15 billion in the previous month. For the same period last year, the deficit was £242 billion.The last time there was a surplus was June 2008.The picture is not so rosy, however, when individual schemes are considered. Over two thirds (68.5 per cent) are still in negative territory, with just 31.5 per cent in surplus.

The reason for the overall improvement is that share prices have risen at a faster rate than the costs of paying out funds to scheme members.The PPF report said: "Total scheme assets amounted to £915.4 billion in March 2010, representing an increase of 3.9 per cent over the month and an increase of 22 per cent over the year to March 2010."Meanwhile, scheme liabilities decreased by 7.6 per cent over the year to March 2010, to £915 billion, but increased 2.1 per cent over the month from £895.9 billion in February 2010."Matters have been further helped by a change in the way that probable future costs of pension schemes are calculated, a move that has shaved some 8 per cent off scheme liabilities, or the equivalent of £70 billion.

The UK economy seems to have sidestepped the dangers of a double-dip recession but still faces many risks, a new study has claimed. According to the British Chambers of Commerce's latest quarterly survey, the economic upturn is on course. On the downside, however, the survey also found that business investment is declining, while job losses in the manufacturing sector continue to climb. The survey, which took in some 5,000 British firms, revealed that the service sector, which comprises the largest segment of the economy, enjoyed an improvement in both domestic and overseas sales during the first quarter of the year.

 Manufacturers, though, experienced stagnation, with sales barely positive and orders still negative. Employment over the last three months in manufacturing recorded a large fall, from +3 in the fourth quarter of 2009 to -16 in the first quarter of 2010. Worringly, investment in plant and machinery, and cash flow are still negative across both sectors, the BCC said. David Frost, the BCC's director general, described the results as mixed but containing some positive features, such as the service sector's improvement and the relatively strong export balances for manufacturers. Mr Frost said: "Businesses are showing resilience despite difficult and uncertain trading conditions. Confidence is building, and the government must nurture this with well-thought out policies that support business growth and job creation. "Special attention must be paid to bolstering our exports in goods and services, which will help rebalance the economy away from an over-reliance on debt and the public sector." Mr Frost urged the post-election government to avoid additional business taxes that could stifle recovery, arguing that the 1 per cent hike in employers' National Insurance Contributions, planned for 2011, should be scrapped and replaced by a 1 per cent rise in VAT. 

 The BCC also wants to see a three-year moratorium on any new employment legislation. David Kern, the BCC's chief economist, added: "These results support the view that GDP growth stayed positive in Q1, but the recovery is set to remain fragile and sluggish. While the upturn in the service sector is gradually gathering momentum, the manufacturing sector is still struggling to enter the recovery phase." Mr Kern highlighted the deterioration of investment levels in plant and machinery as a cause for concern, saying that, unless the sharp declines in capital investment are reversed, the UK's productivity will fall further and the economy will lack the capacity to meet growing demand when the recovery gains momentum. Negative cash flow balances suggest many businesses are still facing serious financial pressures, which are due more to lack of demand rather than to reluctance on the part of the banks to lend. Mr Kern concluded: "Whatever the outcome of the election, a new government must produce a more credible medium-term plan for cutting the country's huge Budget deficit and reducing spending. This will strengthen Britain's credit rating, make it easier for the Bank of England to keep interest rates low for a prolonged period, and underpin the recovery."

The traditional sick note is set to be replaced on 6 April 2010 by a new form of medical statement, called a statement of fitness for work or fit note.  The intention is that the new fit note will help to facilitate an employee’s return to work after illness, thereby reducing sickness related absence amongst the workforce.   

A doctor will be able to advise on the fit note whether an employee is either:   

a) Not fit for work 

OR

b) may be fit for work taking account of the following advice.    

If the doctor advises that option 2 is appropriate, the doctor can suggest ways for the employer to assist an employee’s return to work, for example, a phased return to work, practical adjustments in the workplace, altered working hours or a variation in an employee’s normal duties.   

The doctor’s suggestions are not binding on an employer or an employee, and ultimately it is the employer (and not the doctor) who will be entitled to decide whether any changes suggested by the  doctor and aimed at facilitating the individual’s return to work can be accommodated.    

Also from 6 April 2010, a medical certificate can only be issued for a three month period (instead of the current six months) during the first six months that an employee’s health condition subsists.   

Well all the indicators point to it, over the last two months every recruitment indicator has shown an upward trend, so whether it’s the volume of job orders or the volume of new starters all point to this re-assuring trend. How does this affect candidates? 

Well if you are thinking of looking for work now does appear to be the time to make the move, clients are looking to recruit they are interviewing and making offers to candidates. Our own internal figures show a 30% increase in job orders this quarter compared to the last quarter of 2009, but perhaps more importantly the numbers of people starting new jobs has increased by over 25% in the space over 3 months; not bad for green shoots!?   

The market is still difficult but there is a confidence returning to it that has been missing for the last 18 months especially within real estate and banking.   

If you are thinking of moving on…call us we would happily advise you on your options  

What is Financial Modelling and why is it so important?

Financial modelling (also called excel modelling or business analytics) is a structured approach to decision analysis in order to understand the drivers (inputs) and outcomes (outputs).

Why is Financial Modelling useful?

As individuals and businesses, many decisions we face regarding money are much too complicated today to do accurately on the back on an envelope.  There are too many inputs and most importantly, many of these are uncertain, in other words there is a range from minimum to maximum on each of these inputs.  This means there is a lot of uncertainty or risk.  Understanding this risk is critical for business success.  Otherwise you end up offering loans to people that can’t service them and potentially causing global financial melt down. In short, financial modelling brings clarity to business decisions so that you can make the best decision available.

Sounds great in theory... But does it happen in practice?

Yes! 

In markets that are exposed to high levels of complexity or high levels of risk or both, successful companies are making financial modelling a core and differentiating skill.  Greater identification and understanding of the risk drivers enables focused work in the most value adding areas.  Also, and perhaps more importantly, those organizations that aren’t leveraging the power of business analytics will never price the risk as accurately and will therefore make worse decisions on average that those businesses that have taken the time to understand the risks.

How do successful organizations use modellers?

Successful organizations recognize financial modellers for what they are.  They are analytic and commercially minded staff that know the ins and outs of a business decision better than anyone else.  They’ve read every documents, they’ve understood them so well they can model it, and they know how all the aspects of a deal relate to offer value. Increasingly modellers are recognized as being among the most commercially minded and judicious resources an organization may have.  Consequently they are coming out of the back office and taking a central role in day to day operation and business strategy. Should I consider a career in Financial Modelling? Financial modelling can be an excellent place to start a career.  You learn the nuts and the bolts of a business and so understand the key drivers of success better than anyone else.  You’ll also get great exposure to all the other departments and so be able to make an informed choice about where you are most interested in working.

What is a good modeller?

Modellers are an interesting mix of being highly analytical, numerate and detail focused but also excellent communicators as 50% of their job is talking to subject matter experts (lawyers, accountants, engineers) and working out how to model that aspect of a deal.

What is good modelling?

Good financial modelling in Excel has a number of components: Good financial modelling in Excel has a number of components:

1. Ability to represent a real life problem in excel at an appropriate level of accuracy
2. Ability to build and structure an excel model so that it is robust and flexible
3. Ability to use their model to determine and communication value and risk drivers
4. Ability to format and structure a model so that it is a useful communication tool

Can I get some experience of financial modelling in Excel?

Over the last 20 years, a best practice approach to modelling has been developed to help modellers get the most out of excel for the minimum effort. The guidelines are fairly simple, but the application of them can be a bit more complicated. 

If you want to learn more about best practice modelling check out www.indexmatch.co.uk  who are run by modellers for modellers. We know that a SHOCKING 80% of candidates fail modelling tests.  

IndexMatch offer excellent training that will help you be in teh 20% that succeed

To Bank or Not to Bank               

So the people that have brought the country to its knees are essential to getting us moving forward. What should the government do? Tax them too much and they may up sticks and leave or star performers might simply move to “non-government” owned banks; however there seems to be an appetite for public/electorate revenge on these people that caused all the problems.

I don’t have all the answers but as a recruiter I know the value of people to any organization and Mr Darling and Mr. Brown need to strike the right balance ensuring the excesses of the last 10 years are stopped but not starting a reactionary backlash that will ensure London looses its place as a world leader within the Financial Services industry. We need our part owned state institutions to stay competitive and successful for many years to come..  

Any thoughts let us know

The last month has seen the papers full of comments concerning Bankers and their bonuses…..how many column inches can one subject fill? Few people would argue that in recent years a % of bank bonuses have been over the top and in some cases downright disgusting, however how many people would argue that the vast majority of bonuses are justified and the issue is the value of these bonuses?  

The next 12 months are going to be key to UKPLC and the issue of bonuses will not go away especially when the now government owned and funded institutions are refusing to pay bonus or if they are they are paying them over three years in shares. As a recruiter I have seen a flood of CV’s from extremely talented professionals looking to leave these institutions…It seems simple, there are two choice’s one is a political digestible and political correct institution void of quality that will struggle to pay the government back the money it is owed because many of its best people have left or some kind of middle ground that rewards people responsible for doing a great job and by doing so retains these quality individuals and in turn helps re-pay the debt quicker.  

Unfortunately these institutions have already made the decision and I would suggest that “WE” will regret for many years to come.