Article

A look ahead to 2019

And a reflection on a successful 2018

As the year draws to a close, we reflect on what has been a busy twelve months across Essex. Against a backdrop of continued economic uncertainty, the business community has certainly faced their fair share of hurdles. I struggle to remember a time where the future is so unclear, but fresh challenges often come with fresh opportunities for business owners. Forward planning and keeping up momentum are key to starting the New Year right.

The ‘B’ word and what lies ahead

Brexit has of course dominated this year – indeed it’s difficult to escape conversations about it – and this will continue into 2019.

With the continuing uncertainty about our relationship with the EU as we approach March 2019, we expect businesses across Essex to continue being cautious in their attitudes towards their growth and investment. This ‘wait-and-see’ approach is a common thread we’ve seen among the majority of firms we have worked with.

Whilst no guidelines, laws or rules have been set in stone to date, those businesses that have already been showing signs of distress are more likely to continue on this path for as long as there is a feeling of uncertainty. It’s raised the questions around trading relationships, supply chain links and labour shortages – all which are still unanswered as I write.

Recent research from Lloyds Bank Commercial Banking’s Business Barometer shows that business confidence in the South East fell during November. As the value of the pound dropped, pressures on the cost of raw materials and overheads when buying goods from overseas have increased, squeezing margins even further. And it would be amiss not to mention oil prices. High oil costs, which have come about as a result of increased demand and restrictions in supply, have inhibited growth across the world, as consumer prices are forced to be pushed higher.

But it isn’t all doom and gloom. The same research shows signs of increasing optimism amongst businesses in November, in comparison to what we saw in October. This shows that while management teams may be feeling squeezed at the moment, they are approaching the future with resilience.

Many firms are taking their future into their own hands and proactively asking for help to future proof their business, for advice on next steps or the best route forward.

Seeking help early on is important. So far this year, we have recorded more than 100 businesses across Essex who have fallen into administration or shown signs of distress.

Whether it has been a result of cash flow pressures or trading problems, staffing issues or failing to remain competitive, we’ve worked with management teams to secure the best outcome in what is always a very difficult situation. But we’ve also worked with many businesses to ensure it doesn’t get this far. And in this current economic climate, it hammers home the importance of ensuring management teams plan ahead.

Sector watch

Throughout the course of 2018, we have seen some industries struggle more than others. For example, the construction sector saw 2,764 firms go into insolvency in 2017/18, up 6% on the previous year. Looking to the year ahead, management teams should watch out for rising input prices and a reduction in access to skilled labour. Tapping into the housebuilding sector may be a growth driver for construction firms, as many commercial building developments have been put on hold as a result of Brexit.

The blight of the high street also looks set to continue as the online versus bricks and mortar battle continues, and rent costs continue to sky rocket. Retail businesses need to remind themselves that personalisation and provenance are at the forefront of preference and that the online marketplace needs to be given just as much as attention as any shop, whilst also not letting standards slip in store.

Agriculture businesses look set to benefit from the weaker pound resulting in lower prices. But, farm owners should be mindful of any changing regulation that may impact their trading, as well as the European market turning its head to other regions in the wake of Brexit. Looking beyond the EU and using government schemes to look for international opportunities may help diversify your client portfolio and avoid any shortfall from a future dip in European custom.

Logistic firms may also need to look further afield. There will always be a demand for haulage services, but with the year ahead looking uncertain when it comes to legalities, such as the potential for increased transport taxes and issues with securing permits in the dawn of leaving the EU, firms may need to look to new markets in 2019…

Employment in Essex

724,100 people are employed in Essex, and the establishment of the London Essex Finance Corridor helps the county to capitalise on its proximity to the world’s leading financial services hub.

Throughout the course of 2018, we have worked with a wide range of businesses, and have helped to secure the jobs of 2000 workers across a number of sectors.

When we see firms in distress and running into financial difficulties, we work with the relevant teams to ensure we secure the best outcome for all parties, including creditors and stakeholders. This means working alongside management teams to identify the cracks in the road as early on as possible and agree upon the best route forward for that particular business. This may be identifying a suitable buyer if there is still a commercial opportunity, or making the executive decision to run the business through the liquidation process.

First published in the Essex Chronicle in November 2018.

Related team

Glyn Mummery

Glyn Mummery

  • Partner
  • Restructuring Advisory
  • Brentwood