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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Labour's purge: how it works, and what it means

The total number of people removed will be small - but the rancour will linger. 

Labour has just kicked off its first big wave of expulsions, purging many voters from the party’s leadership rolls. Twitter is ablaze with activists who believe they have been kicked out because they are supporters of Jeremy Corbyn. There are, I'm told, more expulsions to come - what's going on?  Is Labour purging its rolls of Corbyn supporters?

The short answer is “No”.

If that opener feels familiar, it should: I wrote it last year, when the last set of purges kicked off, and may end up using it again next year. Labour has stringent rules about expressing support for other candidates and membership of other parties, which account for the bulk of the expulsions. It also has a code of conduct on abusive language which is also thinning the rolls, with supporters of both candidates being kicked off. 

Although the party is in significantly better financial shape than last year, it still is running a skeleton staff and is recovering from an expensive contest (in this case, to keep Britain in the European Union). The compliance unit itself remains small, so once again people from across the party staff have been dragooned in.

The process this year is pretty much the same: Labour party headquarters doesn’t have any bespoke software to match its voters against a long list of candidates in local elections, compiled last year and added to the list of candidates that stood against Labour in the 2016 local and devolved elections, plus a large backlog of complaints from activists.

It’s that backlog that is behind many of the highest-profile and most controversial examples. Last year, in one complaint that was not upheld, a local member was reported to the Compliance Unit for their failure to attend their local party’s annual barbecue. The mood in Labour, in the country and at Westminster, is significantly more bitter this summer than last and the complaints more personal. Ronnie Draper, the general secretary of the Bfawu, the bakers’ union, one of Corbyn’s biggest supporters in the trade union movement, has been expelled, reported for tweets which included the use of the word “traitors” to refer to Labour opponents of Corbyn.  Jon Will Chambers, former bag carrier to Stella Creasy, and a vocal Corbyn critic on Twitter, has been kicked out for using a “Theresa May” twibbon to indicate his preference for May over Andrea Leadsom, in contravention of the party’s rules.

Both activities breach the letter of the party’s rules although you can (and people will) make good arguments against empowering other people to comb through the social media profiles of their opponents for reasons to dob them in.  (In both cases, I wouldn’t be shocked if both complaints were struck down on appeal)

I would be frankly astonished if Corbyn’s margin of victory – or defeat, as unlikely as that remains in my view – isn’t significantly bigger than the number of people who are barred from voting, which will include supporters of both candidates, as well as a number of duplicates (some people who paid £25 were in fact members before the freeze date, others are affliated trade unionists, and so on). 

What is unarguably more significant, as one party staffer reflected is, “the complaints are nastier now [than last year]”. More and more of the messages to compliance are firmly in what you might call “the barbecue category” – they are obviously groundless and based on personal animosity. That doesn’t feel like the basis of a party that is ready to unite at any level. Publicly and privately, most people are still talking down the chances of a split. It may prove impossible to avoid.

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.