Inflation, Insolvency, and Invoice Finance.

So far this year we have seen dynamic changes to the UK economy and landscape. In this blog we will be discussing key factors and figures to date, such as inflation and insolvency rates.

To start, we will recap on the changes that came into effect in April 2024:

  • Employee NIC reduced from 10% to 8%.
  • Self-employed main rates Class 4 NICs reduced from 8% to 6%.
  • Small and medium sixed businesses will be supported to invest and grow through a £200 million extension of the Growth Guarantee Scheme.
  • VAT registration threshold increased from £85,000 to £90,000.
  • National Living Wage increased by 9.8 per cent (£11.44 per hour, workers 21 and over).

Inflation Rates and causes

The increase in price of an item over time is called inflation. A slowing or falling inflation rate means that prices are rising slower than before, not decreasing. The annual inflation rate is expected to continue falling throughout 2024.

January 2024 inflation rate – 4%

February 2024 inflation rate – 3.4%

March 2024 inflation rate – 3.2%

Causes of high inflation since 2020 (directly from Commons Library UK Parliament) –

“The initial phase of this increase in inflation was mainly due to international factors. These included:

  • Strong global demand for consumer goods – a consequence of the Covid-19 pandemic and associated lockdowns
  • Related supply chain disruption
  • Soaring energy and fuel prices – particularly, but not exclusively, due to Russia’s full-scale invasion of Ukraine in February 2022.

As the UK is a large net importer of goods (including energy), these global factors affected consumer prices in the UK.”

The pressure now seems to be easing for the UK public, after food prices soared by 23.9% between 2022 and 2024.

Due to the above factors, many businesses entered insolvency. The public were simply not spending as much money on recreational activities, or travel and leisure. Construction, retail and wholesale, and hospitality were the three industries with the highest closure rates.

Company Insolvency Statistics

Company insolvencies in 2023 reached a record high, how are businesses across the nation weathering the storm so far?

January 2024 = 1,769 Company insolvencies.

This figure breaks down as follows:

  • 339 Compulsory Liquidations.
  • 1,294 Creditors Voluntary Liquidations.
  • 120 Administrations.
  • 16 Company Voluntary Arrangements.

The total amount of insolvencies is 5% higher than January 2023 (1,685 Company Insolvencies).

February 2024 = 2,102 Company Insolvencies.

  • 217 Compulsory Liquidations.
  • 1,707 Creditors’ Voluntary Liquidations.
  • 166 Administrations.
  • 2 Company Voluntary Arrangement.

February 2023 company insolvency number was 1,801, 17% lower than 2024.

March 2024 = 1,815 Company Insolvencies.

  • 261 Compulsory Liquidations.
  • 1,437 Creditors’ Voluntary Liquidations.
  • 108 Administrations.
  • 9 Company Voluntary Arrangements.

Within these figures sit two major UK Companies: Ted Baker, and The Body Shop. Recently in the news, The Body Shops private equity buyer did not secure funding when HSBC withdrew its funding.

Are any businesses safe?

No. No company is ever completely safe from falling into administration, or insolvency. Sadly, we have lost many major companies over the years, including: Blockbuster, Woolworths, Debenhams. Whilst these companies are Business-to-Consumer, behind the scenes there tends to be outsourced Business-to-Business (B2B) companies contracted to work for them. For example:

  • Haulage companies.
  • Temporary Staffing Agencies.
  • Warehouse Operators.
  • Product Manufacturers.

When a client is lost because they have entered insolvency, this could cause serious cash flow issues for the B2B company supplying their services, especially if they received no forewarning. Leaving the company with tough decisions to make, and feeling the pressure. Do they source a new client QUICKLY? Run to the bank for a loan? Put more spending onto a credit card?

Or, seek alternative funding.

What to do when you need funding?

Stop. Drop. And Roll.

  • Take the time to stop and speak with a professional such as an accountant or broker. They will help you with the process and finding an accredited funding provider.
  • Drop all the businesses figures into a spreadsheet, having a clear incomings and outgoings will help determine how much funding the business needs, and for how long. This sheet is standard practice in day-to-day business. However, when seeking funding you will be asked for proof of historic invoices and payments, and upcoming ones.
  • Roll (Actually, don’t). Don’t roll with the first deal the business is offered. Before you enter into any contract ensure you have enquired about hidden fees or additional fees, and the understood fine print. Be prepared and willing to negotiate the financial agreement.

The benefits of invoice finance

Invoice finance can be used even if you’ve been previously rejected from the bank, might not be considered creditworthy, or have only recently started trading.

Businesses can release around 80% of the value of invoices within 48 hours, and receive the balance (less fees) when their customer pays.

Competitive pricing.

Helps you bridge the gap between invoicing the end customers and receiving the final payment.

Helps manage peaks and troughs in cash flow as your business grows.

Invoice finance is a viable low-cost finance solution for growing businesses.

 Introducers

We welcome all introducers and their clients. We ensure to take a holistic financial approach; we look at the business’s whole financial situation. Our fee structure is presented with no hidden charges, and we are happy to talk your clients through our costings with complete transparency.

We are flexible with our time and presence. Meetings can be arranged for both online and in person. Should you wish to speak directly with a decision maker, their contact details are available to you and your client.

Are You Looking for Alternative Funding?

At Partnership Invoice Finance we have invoice finance options available for start-ups, small businesses, and established enterprises. With our funding solutions, businesses can get the working capital they need to grow and expand their businesses. The funding can also be used as a stabiliser for businesses, for example to pay back loans or debt.

We offer invoice finance to start-ups, SMEs, and larger enterprises with funding from £20,000 up to £1,000,000. If the business struggles with credit control, we have a solution. With recourse factoring we manage every aspect of the credit control saving the business time whilst creating a naturally strong cash flow.

Invoice finance is an extremely helpful tool for SMEs that are facing cash flow issues and those who wish to grow. It is more flexible than most other types of borrowing, giving you access to money when needed the most. Factoring isn’t just an excellent source of finance for businesses, it’s a way to bring stability to a business (and ensure that credit control doesn’t fall through the gaps).

Contact us for more information on invoice finance, how we can fund your clients, and how we can help your business grow sustainably.