Latest news with #S&W
Irish Examiner
25-06-2025
- Business
- Irish Examiner
Advisors key to business restructuring
Financial distress rarely arrives overnight. Margins erode, cash weakens, and boardroom optimism obscures early signs of danger. It is in these moments, before insolvency sets in, that expert advisors make the difference between survival and shutdown. Legal and restructuring specialists agree: the earlier the intervention, the wider the recovery options. Shane Harron, partner at Dillon Eustace. 'The biggest mistake companies make is leaving it too late,' says Shane Harron, partner at Dillon Eustace. 'They often hope to trade their way out of difficulty, but that usually leads to more trouble than may have been necessary.' This reluctance is especially acute among SME directors, who may hesitate to incur advisory costs even when solvency concerns are already visible. Under Irish law, the test for insolvency remains simple: can the company pay its debts as they fall due? If not, directors are required to act in the interests of creditors, not just shareholders. 'This has now been given a statutory footing since 2022,' Harron notes. 'If directors become aware of insolvency, they must act to preserve assets for the benefit of creditors.' Red flags and missed signals There is no single indicator of distress, but signs often compound. Harron points to declining profits or difficulties in meeting essential services like rent or electricity. More subtle signals include late payments to key suppliers or unexpected tax arrears. 'Some of the early warning tools include the strategic maintenance of accounting records, regular financial projections, and a consistent analysis of debts and liabilities,' he says. These steps form part of the Companies Act's early warning framework, aimed at alerting directors to financial danger before it escalates. Alan Large, partner in EY's Turnaround and Restructuring Strategy group, adds: 'Typical early warning signs include breaches of financial covenants, deterioration in EBITDA performance, and sustained negative cash flows.' He also cites key non-financial triggers such as unplanned management departures or persistent customer churn. Stephen Scott, head of Restructuring & Recovery at S&W. David O'Connor, partner at BDO, points to behavioural clues. 'Margins may decline, staff turnover might spike, or creditors go unpaid, but often companies don't connect the dots. They just hope it's a bad month.' Stephen Scott, head of Restructuring & Recovery at S&W, is clear: 'Businesses do not fail because of short-term lack of profitability, they fail because they run out of cash.' Yet many companies continue operating without updated forecasts or real-time visibility of their working capital. That can turn a salvageable situation into a terminal one. David O'Connor, partner at BDO. The case for early external advice All four advisors are unanimous: bring in professionals early. 'Ideally, if directors are apprehensive about solvency, they should engage an experienced insolvency practitioner as soon as possible,' says Harron. Delay reduces strategic options and can increase legal exposure. 'Companies may only face one major crisis in a generation. We deal with them all the time,' says O'Connor. That perspective allows advisors to help with prioritisation, from critical payments and staff communications to negotiations with banks and landlords. Scott notes that for SMEs especially, outside advisors can break decision-making deadlock. 'Directors may feel that nobody knows the business better than them, but expert advice brings not just restructuring knowledge but also a third-party perspective that cuts through noise.' Early advisor engagement also protects directors. Large explains: 'If a business continues to trade while insolvent and incurs further losses, directors may face restriction or disqualification. Professional guidance helps avoid that.' Assessment and Triage The first phase of any restructuring advisory engagement is diagnosis. Harron explains: 'We investigate the company's financial affairs, taking account of assets, liabilities, income and obligations. We assess whether insolvency has occurred, and what rescue options may be available.' O'Connor's team focuses on operational fit. 'We examine whether the company is structured for today's market, not yesterday's. You'd be surprised how many firms carry legacy overhead from products or divisions they no longer run.' That mismatch often emerges in underused space, bloated wage bills or historic debt that no longer reflects business realities. 'You might have €500k in rent but only two-thirds of the space in use. Or staff working legacy roles in departments that have shrunk. That needs to be rebalanced quickly,' O'Connor says. Formal Rescue Options Where viable, companies can enter formal rescue procedures. In Ireland, examinership and the Small Company Administrative Rescue Process (SCARP) dominate. Both give legal protection from creditor action while a survival plan is developed. The difference lies in scale and cost. 'Examinership is court-led and suited to larger companies,' Harron explains. 'SCARP is more streamlined and avoids court unless objections arise. It's designed for SMEs.' The process begins with the appointment of an independent expert. 'We provide the initial report in both examinership and SCARP,' says O'Connor. 'That assessment determines whether there is a reasonable chance the company can survive as a going concern.' If accepted, creditors are grouped into classes and vote on a rescue plan. Once approved, by court or process adviser, those classes are bound, including dissenters. Executing the plan Execution demands discipline. 'Advisors play a key role in identifying non-essential expenditure that can be reduced or eliminated,' says Large. Often this includes exiting loss-making contracts, trimming staff costs, or negotiating revised terms with suppliers. Scott highlights the importance of cash control. 'We help businesses strengthen credit procedures, engage constructively with lenders, manage phased supplier payments, and prepare detailed short-term cash forecasts.' Forecasting has become non-negotiable. 'Many companies operate in an information vacuum,' says Scott. 'That's no longer acceptable in a restructuring context.' Common mistakes Restructuring is not linear. It can unravel if boards are divided or if directors fall into wishful thinking. 'We sometimes see directors continue trading in the hope of a miraculous turnaround,' says O'Connor. 'That usually just deepens the hole.' Large adds that hostility between directors, shareholders or lenders often derails otherwise viable plans. 'Restructuring requires cooperation and transparency. A confrontational approach delays progress.' Another risk is poor record-keeping. Harron warns: 'Directors must maintain clear board minutes showing the rationale for decisions taken. Those records become critical if the process fails and leads to liquidation.' Insolvency proceedings often trigger scrutiny of directors' conduct, something legal advisors are best placed to manage. As Harron says: Where a company goes into insolvent liquidation or receivership, the liquidator must file a report with the CEA (Corporate Enforcement Authority) and consider whether to bring restriction proceedings against the directors.' These proceedings assess whether directors acted 'honestly and responsibly' in the lead-up to insolvency. If they are found lacking, courts can impose a five-year restriction on holding directorships, or in more serious cases, disqualification. Harron emphasises the importance of pre-emptive action. Directors should keep accurate books and records, seek professional advice at the earliest sign of financial trouble, and document decisions thoroughly. These steps form a crucial defence if proceedings are later initiated. While there is no legal obligation to place an insolvent company into liquidation at the first sign of distress, delay increases exposure. Harron notes that 'the strategic maintenance of accounting records, regular financial projections and a consistent analysis of debts and liabilities' form part of the Companies Act early warning framework, tools that, if properly used, can guide directors through uncertainty and reduce personal risk. Strategic outcomes Sometimes the path is salvage. O'Connor shares a recent case: 'A national food chain entered examinership. We prepared the independent expert report, and the court appointed an examiner. That gave them space to restructure. It protected jobs and kept the brand alive.' Other times, value is recovered even in liquidation. Harron notes a case where the company had lost its overseas licence. 'The liquidator reinstated the licence, completed manufacturing, and extracted higher value than by simple asset sale. Creditors benefitted.' Governance, ESG and structural complexity Modern restructuring involves more than cash and contracts. Governance, ESG and tax efficiency now feature prominently. 'Governance failures are closely examined in formal processes,' says Large. 'Sophisticated lenders now ask about ESG and strategic alignment before funding.' Group structures also require scrutiny. 'Even mid-sized businesses can have overly complex structures that add cost and risk,' says Scott. 'Restructuring presents a chance to streamline and unlock value.' Strategic restructuring is about timing, clarity and decisive action. Directors who confront distress early and engage advisors improve their odds of recovery. Those who delay may find that the path to rescue has narrowed or closed entirely. In today's climate, where cash runs tighter and lender tolerance is thinner, that distinction can be fatal.
Times
20-06-2025
- Business
- Times
Insolvencies rise as firms face tariffs and higher costs
The number of businesses becoming insolvent rose sharply last month as companies faced higher staff costs and continuing uncertainty over trading arrangements with the United States. Business insolvencies in England and Wales rose 15 per cent to 2,238 in May compared with the same month a year ago, according to data from the Insolvency Service. The figures showed that the number of creditors' voluntary liquidations, through which a director chooses to close down the business, rose by 13 per cent to 1,734, while the number of company administrations, which usually involve larger enterprises, was up by 12 per cent to 136. Businesses started paying higher national insurance contributions for employees in April and also faced an increase in the national minimum wage. The corporate environment has also been hit by uncertainty over tariffs, although Britain has now signed a trade deal with the US. Tom Russell, president of R3, the UK's insolvency and restructuring trade body, said the uncertainty over trade costs had made 'medium and long-term planning more difficult' for companies. Mark Ford, partner in the restructuring team at S&W, the professional services firm, said: 'The impact of sluggish economic growth, high borrowing costs, low consumer confidence and high inflation in recent years has eroded cash reserves for businesses and left some in a perilous position. 'Businesses are now facing newer challenges that threaten their viability and this means we are likely to continue to see a steady stream of company insolvencies in the coming months. 'Higher costs resulting from increases to employer national insurance contributions, the minimum wage and business rates are all heaping considerable pressure on businesses, particularly those that feel they are unable to increase prices for fear of losing customers.' Kathleen Garrett, partner at Reed Smith, the law firm, said the Bank of England's decision to hold interest rates on Thursday showed that while borrowing costs were falling, they were facing 'a much more gradual descent than many would have hoped'. She added: 'Businesses are facing a raft of challenges which have caused insolvencies to start rising again. The headwinds from additional business costs such as the recent increases to national insurance and a fraught geopolitical environment in terms of tariffs and unrest appear to have had an effect on business.'
Daily Mail
20-06-2025
- Business
- Daily Mail
Insolvencies jump as Rachel Reeves' labour costs hike hits businesses
Business insolvencies across England and Wales rose sharply last month as firms buckled under the pressure of higher labour costs associated with last year's Autumn Budget, official data suggests. Insolvencies jumped 8 per cent month-on-month to 2,238 in May, reflecting a 15 per cent increase on the same time last year, according to the Government's Insolvency Service. It follows hikes to employer national insurance contributions and the national living wage in the previous month, compounding the impact of lacklustre economic growth, high borrowing costs and fragile consumer confidence. Mark Ford, partner in the restructuring and recovery team at consultant S&W, said the 'challenging operating environment' had 'eroded cash reserves for businesses and left some in a perilous position'. He added: 'Businesses are now facing newer challenges that threaten their viability and this means we are likely to continue to see a steady stream of company insolvencies in the coming months.' Insolvency growth in May was driven by 1,734 creditors' voluntary liquidations, where company directors choose to shut a business down. The Insolvency Service recorded 354 compulsory liquidations, but this was down 7 per cent on April's 10-year high. Giuseppe Parla, restructuring and insolvency director at Menzies, identified construction, wholesale and retail trade, and hospitality as sectors that will continue to struggle against higher costs. He added: 'Whilst interest rates may come down further later in the year, stability for our economy seems to be what is required, but how easy will that be to achieve?' The Insolvency Service also recorded 136 company administrations, which are a recovery procedure often used by larger entities to ensure a better outcome for creditors. David Hudson, restructuring advisory partner at FRP, said the 'quiet, but steady' rise in administrations is 'particularly concerning'. He said: 'These usually involve the very largest businesses and so could prompt a significant knock-on impact in terms of jobs and supply chains if they continue to rise. 'It's also an early signal that financial distress is deepening – not just among smaller businesses, but at the top end of the market too.'
Yahoo
17-06-2025
- Business
- Yahoo
Third of businesses planning further job cuts after national insurance hikes
A third of business owners have said they plan to cut more jobs after being hit by higher national insurance contributions (NICs) in April, according to new research. Many companies have also suggested they will cut back hours, freeze pay and hike prices in order to help cover increased tax payments. S&W's business owners sentiment survey revealed around 20% of those quizzed said they have already reduced their staff numbers as a 'direct result' of the NICs changes which came into effect in April. Last year, Chancellor Rachel Reeves announced in her autumn budget that employers' NICs would rise from 13.8% to 15%, while the threshold at which firms would start paying also increased. The increase came in at the same time as the jump in the national living wage and reduced business rates relief for some firms. The survey found 33% of business owners said they were still planning further cuts to staff numbers after feeling the impact of the tax increase. Firms said they were also looking to a series of other measures in order to offset the jump in their operating costs. The survey of 500 UK business owners with turnovers of £5 million upwards also showed 46% of those surveyed said they were planning further price increases as a result. Meanwhile, 35% of business owners said they planned to reduce staff hours and 29% said they were looking at freezing pay. It comes as firms highlighted higher commodity and energy costs, as well as disruption from wider macroeconomic uncertainty. Claire Burden, partner in consulting at S&W, said: 'Businesses face considerable challenges in the current economic climate and many owners are having to make difficult decisions to stay afloat. 'Given that salaries represent a considerable proportion of the overall cost base for most businesses, it is to be expected that many are looking closely at headcounts in response to the increased national insurance costs.' Alex Simpson, partner in employer solutions at S&W, said: 'For most businesses, the extent of the employers' NIC change was a surprise. 'We anticipated an increase in the employers' rate, but the additional reduction to the earnings threshold was not expected and is expected to have a dramatic impact over time.' A Government spokesman said: 'We are a pro-business government. We are protecting the smallest businesses from the employer national insurance rise, shielding 250,000 retail, hospitality and leisure business properties from paying full business rates and have capped corporation tax. 'We delivered a once-in-a-Parliament budget last year that took necessary decisions on tax to stabilise the public finances, including the NHS which has now seen waiting lists fall five months in a row. 'We are now focused on creating opportunities for businesses to compete and access the finance they need to scale, export and break into new markets.' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
17-06-2025
- Business
- Yahoo
Third of businesses planning further job cuts after national insurance hikes
A third of business owners have said they plan to cut more jobs after being hit by higher national insurance contributions (NICs) in April, according to new research. Many companies have also suggested they will cut back hours, freeze pay and hike prices in order to help cover increased tax payments. S&W's business owners sentiment survey revealed around 20% of those quizzed said they have already reduced their staff numbers as a 'direct result' of the NICs changes which came into effect in April. Last year, Chancellor Rachel Reeves announced in her autumn budget that employers' NICs would rise from 13.8% to 15%, while the threshold at which firms would start paying also increased. The increase came in at the same time as the jump in the national living wage and reduced business rates relief for some firms. The survey found 33% of business owners said they were still planning further cuts to staff numbers after feeling the impact of the tax increase. Firms said they were also looking to a series of other measures in order to offset the jump in their operating costs. The survey of 500 UK business owners with turnovers of £5 million upwards also showed 46% of those surveyed said they were planning further price increases as a result. Meanwhile, 35% of business owners said they planned to reduce staff hours and 29% said they were looking at freezing pay. It comes as firms highlighted higher commodity and energy costs, as well as disruption from wider macroeconomic uncertainty. Claire Burden, partner in consulting at S&W, said: 'Businesses face considerable challenges in the current economic climate and many owners are having to make difficult decisions to stay afloat. 'Given that salaries represent a considerable proportion of the overall cost base for most businesses, it is to be expected that many are looking closely at headcounts in response to the increased national insurance costs.' Alex Simpson, partner in employer solutions at S&W, said: 'For most businesses, the extent of the employers' NIC change was a surprise. 'We anticipated an increase in the employers' rate, but the additional reduction to the earnings threshold was not expected and is expected to have a dramatic impact over time.' A Government spokesman said: 'We are a pro-business government. We are protecting the smallest businesses from the employer national insurance rise, shielding 250,000 retail, hospitality and leisure business properties from paying full business rates and have capped corporation tax. 'We delivered a once-in-a-Parliament budget last year that took necessary decisions on tax to stabilise the public finances, including the NHS which has now seen waiting lists fall five months in a row. 'We are now focused on creating opportunities for businesses to compete and access the finance they need to scale, export and break into new markets.'
