Companies ease out of financial distress

34 per cent decline in "critical" difficulties.

Fewer companies are facing severe financial distress than they were a year ago, in a sign that the economic climate might be improving in the UK

According to the Begbies Traynor Red Flag Alert for Q1, there has a been a 34 per cent decline in companies rated as having “critical” financial difficulties. Across all sectors, the number of companies reduced from 5,000 in the first quarter of last year, to 3283 in Q1 2013.

However, Begbies Traynor warned that the improvement “masks a patchy recovery” and said that sectors reliant on the consumer economy such as retail, leisure, media and real estate had seen an increase in financial distress for the period.

Plus, taken on a quarterly basis, there has been an 8 per cent increase in critical companies from the last quarter of 2012.

The number of leisure companies facing severe financial distress has rocketed by 81 per cent since last quarter, which the report says may be due to unseasonably cold weather in the start of the year. The number of construction companies in critical conditions almost halved compared on last year’s numbers, whereas the real estate sector hs seen fincnail ditress levels rise 24 per cent in the last year.

Julie Palmer, partner at Begbies Traynor, said, “The year on year improvement reflects the continued forbearance and benign monetary conditions facing UK businesses today, combined with an improving credit environment, albeit primarily for larger corporates. Business confidence is slowly returning in the form of greater business spending on both services and investment.”

The report also sounds concern over the lack of funding available to support the SME sector. The number of companies that managed to secure new funding had dropped by 14.5 per cent from a year ago, and down 11 per cent on a quarterly basis.

Palmer added: “The underlying trend is arguably one of an improving picture. However, given the slight increase in distress compared to the previous quarter, it remains to be seen if we are out of the woods yet. With business rate increases planned in April, HMRC’s new PAYE Real Time Information requirements coming into effect, and further minimum wage rises ahead there are still significant headwinds for the UK SME sector, which is typically less able to bear the burden of these changes than their larger counterparts.”

The support services and professional services sectors have seen the strongest recovery in the last year.

This story first appeared on economia

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This is a news story from economia.

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Fewer teachers, more pupils and no more money. Schools are struggling

With grammars and universal school meals, both main parties have decided to answer policy questions no one is asking.

If you ask people in Britain what the ­biggest political issues are, schools don’t make the top five. Yet last week Labour set its first party political broadcast in a fictional classroom where a teacher described Jeremy Corbyn’s plans for schools’ future. Without a Labour government, the teacher opines, there will be no more libraries, or teachers, or school trips. Though the scenario is a flagrant breach of the law – teachers must remain politically impartial – education isn’t a bad place for Labour to start its campaign. Schools really are quite screwed.

Three things are hitting hard. Schools have less money, fewer people want to be teachers, and an avalanche of under-sevens is hitting the playgrounds and won’t stop for several more years.

How did we get here? In 2015 the Conservatives pledged to keep school funding at the same rate per pupil over the lifetime of the parliament. Yet while the money coming in has remained flat, schools have faced huge hikes in costs, particularly staffing. Big increases in mandatory pension contributions and National Insurance have taken their toll; so has the apprenticeship levy. The
Institute for Fiscal Studies estimates that all told, schools will have lost about 8 per cent of their budget by 2020. That’s £3bn of savings that must be found. Or, more bluntly, the starting salaries of 100,000 teachers.

It is worth remembering at this point how huge the schools sector is and how many people are affected. About half a million teachers work in the 20,000-plus state schools. A further 300,000 people work in allied professions. There are eight million children and an estimated 12 million parents. Lump in their grandparents, and it’s fair to say that about 20 million voters are affected by schools in one way or another.

The budget squeeze is leading many of these schools to drastic measures: firing teachers, increasing class sizes, cutting music from the curriculum, charging parents for their child’s place on a sports team, dropping transport provision, and so on. Begging letters to parents for donations have become commonplace; some have asked for contributions of up to £60 a month.

On top of money worries, teachers are abandoning the profession. In 2015, an additional 18,000 went to work in international schools – more than were trained at universities over the same year. They joined the 80,000 teachers already working in British schools abroad, attracted by higher pay and better working conditions.

Graduates are also snubbing teaching. With starting salaries increasing at less than 1 per cent a year since 2010, new teachers are now paid about 20 per cent less than the average graduate trainee. Changes to higher education are also such that trainees must now pay £9,000 in order to gain their teaching qualification through a university. The government has missed its target for teacher trainees for five years now, and there is no coherent plan for hitting it.

No money and no teachers is less of a problem if you are in a demographic dip. We had a bizarrely low birth rate at the turn of the century, so we currently have a historically small proportion of teens. Unfortunately, the generation just behind them, of seven-year-olds and under, is enormous. Why? Because the “baby echoers”, born in the 1970s to the baby boomers, had children a bit later than their parents. Add to that the children recently born to immigrants who arrived in their twenties when the European Union expanded in the early 2000s, and Britain is facing an El Niño of toddlers. By 2025 a million extra children will be in the school system than in 2010.

To keep on top of the boom the government has been creating schools like a Tasmanian devil playing Minecraft. But 175,000 more places will be needed in the next three years. That’s the equivalent of one new secondary school per week from now until 2020.

In fairness, the government and councils have put aside money for additional buildings, and roughly the same number of parents are getting their first-choice school as before. The free schools policy, which delivers new schools, has not always been well managed, but it is now more efficient and targeted. However, many more children combined with squeezed budgets and fewer teachers typically leads to bigger class sizes. Most classrooms were built to house 30 pupils. Exam results may not get worse, but no parent wants their child working on a makeshift desk improvised out of a windowsill.

Instead of addressing these challenges, both main parties have decided to answer policy questions no one is asking. Theresa May wants more grammar schools, ostensibly because they will give more choice to parents – though these are the only schools that pick pupils, as opposed to the other way around. And she says they will aid social mobility, though all the evidence (and I really do mean all) suggests the opposite.

Jeremy Corbyn, meanwhile, is offering free lunches to all seven-to-11-year-olds, which sounds worthy until you realise that children from low-income families already get free lunch, and that feeding every child a hot sit-down meal is virtually impossible, given the limited space and kitchen facilities in most schools. Plus, the evidence this £1bn policy would make any significant difference
to health or attainment is pretty sketchy. Labour has also sensibly talked about cash and promised to “fully fund” schools, but it isn’t clear what that means.

What’s missing so far from the Conservatives and Labour alike is a set of policies about teacher recruitment or place planning. The sector needs to know how schools will be built, and where the teachers will come from for the extra kids. In other words, the message to both sides is – must try harder.

Laura McInerney is the editor of Schools Week and a former teacher

Laura McInerney taught in East London for six years and is now studying on a Fulbright scholarship at the University of Missouri. She also works as Policy Partner at LKMCo.

This article first appeared in the 27 April 2017 issue of the New Statesman, Cool Britannia 20 Years On

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