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Business Profitability: Remaining profitable through COVID and BREXIT
The combined effects of BREXIT and COVID have started to affect many British companies’ income and their cashflow for a variety of reasons. Many business owners are wondering if there is anything they can do to protect their margins and, ultimately, to continue to trade profitably. As a Debt Collection Agency, business throughout the pandemic has been OK, with the exception of the initial shockwave of the spring 2020 when everything stopped. Against all odds, 2020/21 has been our most profitable year ever.
Business Profitability: Always keep productivity front of mind
UK businesses have always been perceived as low ranking in terms of their productivity (between 10th and 15th in the world depending on mode of calculation) compared to where they should be, given the size of the UK economy (5th or 6th in the world depending on sources). COVID has certainly accelerated investment in new technologies, but for many companies, more is required to make up for the increased costs generated by red tape, new regulations, delays at ports and border crossings, import duties, loss of contracts due to delays, etc, which BREXIT is continuing to bring with it. At CLI, we invested in a new telephone system as soon as we started working remotely from the office. This way, our staff did not need to use mobile phones and all calls could continue to be recorded. This new tool also includes a user chat facility and video calling and conferencing facility. This initial investment greatly improved productivity, especially in the collection team. We also took the opportunity of a potentially very difficult year to review our processes, workflows, and ways of working. Finally, the increase in late payment generated by BREXIT trading difficulties, mainly late deliveries and increasing query levels, has generated more debt collection instructions for us. All these factors have contributed to our increased growth in 2020/21.
Pros and cons of Government support throughout COVID
The Government support schemes have been useful to keep businesses alive but one wonders what is going to happen once that huge safety net is removed. Many expect insolvencies to surge and the UK economy to not recover as easily as the most optimistic politicians predict. These support schemes have had unfortunate side effects.
Some of the businesses who have taken up the VAT deferral scheme are already struggling to repay their instalments on time. With the furlough scheme ending at the end of September, companies will have the choice between paying full wages to their returning teams even if they are still experiencing reduced activity levels or laying off experienced staff. Soon after that, these same businesses will have to start repaying their “Bounce Back Loans” (now over 10 years instead of 6 if they wish) at 2.5% interest per annum. It’s anyone’s guess how much of these GBP45bn loans extended to some 1.4 million UK businesses will never be repaid.
On a more positive note, with the end of the furlough scheme approaching, qualified labour should get released on the job seekers’ market which will benefit growing companies like ours. It is quite unbelievable that we have been unable to recruit back-office staff. Our apprenticeship provider has been looking for Business Admin apprentices for nearly 2 months and there have been no candidates. The Government has doubled the incentive for recruiting a new apprentice to £3,000 since 1st April 2021 but demand has been poor… Being unable to recruit to support our growth is something that has never happened to us in 12 years of trading.
Brexit
Availability of labour is not just a UK issue, but we are experiencing it more than our EU colleagues given that so many Europeans have returned home post-Brexit.
From a debt collection perspective, EU citizens leaving the UK without settling their final bills has left many utility companies with increased debt levels from their non-UK customers. Those utility suppliers which have gathered good quality personal data at the outset should be able to recover their debts. Tracing individuals in another EU country can be tricky but with good data and the right service provider, these debts can be recovered.
Why Choose Us
30 Years experience delivering successful debt collection solutions to businesses
Years Experience
Business Clients
recovered /YEAR
COUNTRIES SERVICED
under management
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