Tough times put region’s firms at risk of becoming ‘zombie’ companies
One in seven of the East of England’s mid-sized businesses are at risk of becoming so-called ‘zombie’ companies as rising costs and tough economic conditions reduce the scope for growth. Real estate and leisure & hospitality firms are amongst the most vulnerable sectors. According to research from BDO, the share of the region’s mid-sized firms – with turnovers of £10-500 million – which are at risk has risen to 14.3 per cent, up from 12.2 pc a year ago. Zombies are firms that generate enough cash to keep operating and service debt but not to invest in growth. Nationally, 15.9 pc of mid-sized businesses are classed as ‘at risk’, a rise of 3.5 percentage points. Real estate has the highest number of ‘at risk’ companies – around a quarter- followed by firms involved in leisure & hospitality and mining & quarrying. Ben Paterson, partner at BDO in the East of England, said: “Although many [mid-market businesses] have managed to navigate a difficult post-Covid environment, rising borrowing costs and inflationary pressures have significantly impacted their financial stability. Some of these companies cannot afford to wait for market conditions to improve, particularly in light of upcoming increases to employers’ national insurance contributions, the national minimum wage and the national living wage, all of which will have a direct impact on profitability.”
Colchester retail park acquired for £34 million
Stane Retail Park in Colchester has been acquired for £33.95 million from developer The Churchmanor Estates Company by a private South African investor client of Pembrey Asset Management. The purpose-built retail park was opened in phases between October 2021 and October 2022 and comprises 123,637 sq ft of retail space. It is anchored by an 80,000 sq ft purpose-built M&S which sits alongside a national tenant line up of Superdrug, Mountain Warehouse, Furniture Village, Greggs & Cook. A B&Q and Aldi are held in a separate freehold ownership. Matt Cloke, at Churchmanor Estates, said: “We are delighted to have completed this sale, marking the conclusion of 12 years ownership and development of Stane Park by Churchmanor Estates, which started with the opening of the adjacent leisure park in 2017. The successful sale is a testament to the strength of the location, the quality of the development and the tenant line up that we have put together”. Churchmanor Estates was represented by XPROP, their funding was provided by Close Brothers and its legal work was by Birketts.
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Number of Cambs companies grows to record high
The number of registered companies in Cambridgeshire grew to an all time high of 61,973 at the end of last year up, up from 60, 023 at the close of 2023, according to new figures. Meanwhile 8,588 new businesses were set up in the county. The figures came from the Inform Direct Review of Company Formations, using data from Companies House and the ONS. Peterborough formed the most new businesses (2,834), followed by Cambridge (1,777) and South Cambridgeshire (1,585). John Korchak, managing director at Inform Direct, said: “It is really good news that Cambridgeshire can celebrate a record number of companies. The year undoubtedly presented a range of challenges for business with the uncertainty of the General Election, the introduction of new regulations and concerns over Labour’s first Budget in October which included the increase in employer National Insurance. World events also played a part in economic volatility with the US Election and instability in the Middle East high up on the list.” He added:“Despite all these factors, businesspeople in Cambridgeshire demonstrated great resilience and inspired leadership, evidenced in this successful result.” Across the UK, a record total of 5,637,210 companies were register, an increase on the previous 12 months of 5,476,772.
To see the report go to www.informdirect.co.uk/company-formations-2024/
Insolvencies rise but more firms ‘have potential to be rescued’
Tough trading and the coming business tax rises drove up corporate insolvencies in January to the highest monthly level in five years but an increase in administrations suggest more firms have the potential to be rescued, says the Eastern branch of R3. Insolvency Service figures show corporate insolvencies in January were 11 per cent up on the month a year ago and 6.4 per cent higher than in December. R3 Eastern chair Hayley Watson said: “The monthly rise in corporate insolvencies is due to an increase in the number of creditors’ voluntary liquidations and administrations.” But she added: “There is, however, some positive news in all of this in the form of the rise in administration numbers. They are higher than both this time last month and this time last year, indicating that there are more companies which have the potential to be rescued through a sale out of administration, helping to maximise creditor returns and safeguard jobs.
Family businesses urged to look at pre-nups as succession plans brought forward
Law firm Birketts has seen increasing numbers of family businesses bringing forward succession plans to avoid the increased capital gains tax rates announced in the Autumn Budget. Typically, shares are being passed to younger family members sooner, usually sons and daughters. But the firm is warning that this can give rise to other issues – such as what will happen to those shares if the person receiving them later goes through a divorce or separation. Stefan Donnelly (photo, right), family lawyer at Birketts, said: ““Family businesses thrive on long-term stability and continuity. In the unfortunate event of a divorce, a nuptial agreement can prevent the family business from becoming a point of contention, which could lead to the business being broken up, sold, or lost. By establishing clear guidelines regarding the transfer of shares, family members can avoid the potential distraction and financial strain that may arise during a divorce.”
First tenant arrives in newly-completed business park
Systematic Business Park, a scheme of 30 hi-spec industrial units in Colchester, has reached has practical completion and signed up its first tenant. Owner and developer of the scheme, MCR Property Group, has leased two units of just over 3,800 sq. ft to Lifecycle Oils, an expanding waste oil recycling business. The £25 million development on Old Ipswich Road across a 5.5 acre site offers units ranging in size from 1,700 – 4,867 sq ft with larger combined units available. Michael Moody of Fenn Wright – joint letting agent – said: “With the scheme just reaching practical completion and units available for immediate occupation, Systematic Business Park sets a new benchmark for industrial developments in the area and provides some much-needed supply of this type of property. Several other units are already under offer and in negotiations, reflecting strong demand in the market. Life Cycle Oils will have new neighbours very soon.”
Photo (l-r): Joe Saxby (MCR Property Group), Cameron Thomson (MCR Property Group), Emma Jenkins (Lifecycle Oils), Michael Moody (partner, Fenn Wright), Tim Collins (director, Kemsley).
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