Posted 9 May 2016 By Paul McConnell, Business Recovery and Insolvency Practitioner
In Business Recovery & Insolvency
There has been much media coverage this week of the decline of BHS, culminating in the appointment of Administrators. Trade creditors approaching £50m are likely to receive no payment; many of those are small businesses and BHS may have been their only or major customer.
A Company Voluntary Arrangement (“CVA”) was approved for BHS in March, which it was hoped would help save the business but one factor that seems to have contributed to killing off the CVA was the further squeeze on credit insurance for suppliers. The impact on availability of ongoing/new credit has always been a major hurdle for the CVA route and is probably the greatest single reason why CVAs do not have greater uptake (in fact, at their lowest level since 1998!)
Contrast this against a back-ground of falling numbers of insolvencies in the recently published insolvency statistics for quarter 1, 2016: Liquidations at the lowest level since 1984 (as a % of live companies); Administrations down 11% on same period last year and CVAs down 13% (see above).
It is becoming harder to predict which companies are at risk but one thing is clear, those who have stripped out capital with no regard to future investment and “rainy days” will always be first to struggle.