In recent months Printweek has seemingly reported on at least a couple of business failures nearly every week, with major names like Northwolds Richardson Group, Sirane, RNB Group, Hamilton Adhesive Labels, H Charlesworth & Co – which traded as Charlesworth Press – Mailbox DM, Celloglas and many more having to call in the insolvency practitioners.
According to government data, the number of UK company insolvencies in the area it lists as ‘Printing and service activities related to printing’ have been rising over the past couple of years, with 79 insolvencies seen in 2020, 72 in 2021, 143 in 2022, and 148 in 2023.
The figure was understandably lower during the pandemic, with businesses supported by CBILS loans and the furlough scheme, but even pre-pandemic the number was lower, with 117 industry insolvencies in 2019, up from 104 in 2018.
April this year saw the highest number of monthly print insolvencies for nearly a year, with 21 recorded in that month alone, with another 12 in May and 15 in June.
Administration doesn’t always mean the end of the road. Many failed businesses are subsequently either bought in full or have their assets snapped up.
Established names with a loyal customer base or high-quality equipment can be an attractive proposition to buyers, especially if the price is right – or extremely low, usually – and if debts can be left behind.
This is often the case with pre-pack deals – a particularly recurring theme in print – which sometimes see unconnected parties taking on a struggling business but quite often see the old management team returning with an ever so slightly altered company, but none of the old baggage.
Pre-packs are generally, and understandably, unpopular in print, particularly with unsecured creditors – the bulk of which are often trade companies who have supplied goods and services to the failed companies and who can sometimes be hit for tens of thousands of pounds, damaging their own cashflow in the process and potentially causing knock-on effects down the line.
A recent Printweek poll that asked readers if they support industry pre-packs returned a resounding 67% result for ‘Never, creditors are always stung’. 23% said they support them but only if the buyer is not connected, while the remaining 10% said they do support pre-packs, because ‘they make sense and preserve jobs’.
The insolvency profession is trying to change the negative perception that has existed around pre-packs.
“Pre-pack sales are often the best way to preserve value for stakeholders, preserve jobs and save businesses,” says Julie Palmer, partner at Begbies Traynor.
“They are subject to strict control and transparency but often, not always, it will be the connected management teams who will offer the highest price for the business.”
She adds: “Unsecured creditors often lose out in pre-packs and can get little or no return. That is a consequence of the order of creditor priority and the lack of value when a business is failing with not enough to pay everybody.
“It’s not a consequence of pre-packs themselves, which are a tried and tested way of saving businesses and at least preserving future trade.”
Steve Mepham, owner and director at specialist debt collection agency NPD & Co, says pre-packs were up 23% in 2023 on 2022.
“Pre-packs are just a legal way of creating the new phoenix company. Why are they used so often? Well, it means the insolvency practitioners can say they have helped save/retain some jobs, the business emerges under someone who knows it and can hopefully not make the same mistakes, and of course, they get paid!
“Sadly, it’s happened all too often, particularly in the print and paper sectors. You only have to look at a list of creditors with some of these failed companies to see familiar names of suppliers who will top the list of creditors, be they paper companies, merchants, ink suppliers or equipment manufacturers.
“They have taken large hits, but, again, will continue to supply the new company in the hope of maintaining their relationship and getting some revenue back, knowing that the company will only go to a rival supplier if they don’t.”
While it may have felt like an especially gloomy period for print, Mepham stresses that the same thing is happening across all sectors of business currently.
“The after-effects of the pandemic are now starting to take effect on some businesses as the loans have now been spent, while others have been struggling to survive and either costs have just become too unsustainable, or the current economic climate and the everyday running and maintenance costs associated with their businesses have just become too much.
“Other factors such as cheaper imports, diminishing, shrinking markets and sectors, Brexit etc, can also be factored in.”
So, what can struggling companies do to survive a downturn and avoid becoming another print casualty? Ian Carrotte, owner and CEO of print industry credit check agency ICSM, says they can start by prioritising paying off their loans and debts.
He adds: “Trim overheads such as moving to cheaper or smaller premises. The owners may not be able to cut wages, but they can pay themselves less and do away with expensive contracts on company cars and other unnecessary add-ons.
“Diversify if possible – can those vans also be used some of the time as couriers for instance? Talk to your suppliers if you have a cashflow crisis – they will often be more understanding if you are honest as they would like to retain you as a customer in the long run.
“And work hard at keeping the customers you have – something that many firms forget to do.”
