UK firms in ‘significant financial distress’ hits record – business live

The ongoing strike at Boeing is causing ructions through the aerospace sector.

Bloomberg are reporting that Spirit AeroSystems Holdings will start furloughing workers later this month in response to the walkout at its biggest customer.

Spirit will implement a 21-day furlough for about 700 workers supporting Boeing’s 777 and 767 jetliner programs beginning on 28th October, Spirit spokesman Joe Buccino said. If the strike at Boeing, soon to enter its sixth week, continues past November, Spirit will need to extend unpaid leave and begin layoffs, he said.

Buccino explained:

“These furloughs are in combination with a series of other cost savings measures, including a hiring freeze and travel and overtime restrictions.”

Airline bosses expressed concern earlier this week that the Boeing strike will lead to delays to aircraft deliveries.

Gold has broken through the $2,700 barrier for the first time.

Bullion hit a new alltime high of $2,717.37 per ounce today, helped by forecasts of interest rate cuts.

Demand for safe havens as the Middle East conflict continues, and ahead of the US presidential elections, also boosted gold.

Samer Hasn, senior market analyst at XS.com, says:

Gold’s gains come amid renewed geopolitical uncertainty from the Middle East, with growing question marks over the course of the conflict in the region following the killing of Yahya Sinwar.

Gold’s gains in the Asian session also coincided with data from China showing further slowdown in economic growth and shrinking house prices.

The U.S. auto safety regulator has opened an investigation into Tesla’s Full Self-Driving software after reports of four collisions, including one fatal crash, involving its driver-assistance technology in low-visibility conditions.

The preliminary probe will cover 2.4 million Teslas, the National Highway Traffic Safety Administration said, and examine how FSD copes with reduced roadway visibility conditions, such as sun glare, fog, or airborne dust.

Boohoo’s chief executive is stepping down as the online fashion retailer launches a strategic review of its brands, which include Debenhams, Karen Millen and PrettyLittleThing, that could result in a breakup of the company.

John Lyttle, who joined from Primark in 2019, has agreed to remain in post until a successor is found.

Shares plunged more than 9% in early trading as investors reacted to the surprise news, but later recovered most of their losses.

The company, which has cut jobs amid widening losses and falling sales in the face of competition from rivals such as the Chinese online fast fashion retailer Shein, also said that it had agreed a new £222m debt facility with its bankers.

Russ Mould, investment director at AJ Bell, says:

“The starting gun has been fired on the break-up of Boohoo. A review of each division to ‘unlock and maximise shareholder value’ is code for corporate restructuring and that points to a sale or demerger of some of its assets.

“Selling Karen Millen and Debenhams is the obvious starting point, leaving Boohoo with a sharper focus on a younger target market.

“The company is under pressure to stop the rot with its disastrous share price since 2021. It has suffered from heightened competition, changing consumer buying habits, cost pressures and regularly falling short with meeting earnings expectations. These issues have weighed on the company’s valuation.

“When Boohoo talks about unlocking shareholder value, it means getting someone to put a fairer price on certain divisions by separating them from the parent group. In doing so, they wouldn’t carry the stigma and valuation discount that comes with being part of a flagging retail group.

Mike Ashley hasn’t given up his chase for fashion brand Mulberry, it seems.

Ashley’s Frasers Group has told the City that it has not yet received formal feedback from the board of Mulberry on its sweetened takeover offer, made last week.

Frasers also “notes” that Challice, the group which owns 56% of Mulberry, said last weekend it had no interest in selling its shares, adding:

Accordingly, Frasers has sought to engage with Challice directly.

Frasers owns a third of Mulberry.

It also owns 20% of online retailer N Brown, which yesterday announced it is being taken private in a £191m takeover by a member of its founding family, Joshua Alliance.

Frasers says it has signed an irrevocable undertaking to vote in favour of the deal.

And, in a notably cheerful regulatory statement, Frasers wishes Alliance and his team all the best:

Frasers wishes Joshua Alliance and the N Brown management team every success for the future, and although Frasers will have divested of its shareholding in full, Frasers looks forward to a strategic relationship with Joshua Alliance and the N Brown team post-Acquisition.

Frasers would also like to take the opportunity to thank N Brown and Joshua Alliance for the fulsome engagement ahead of the Acquisition Announcement.

Newsflash: There’s been a sharp increase in the number of people falling into insolvency in England and Wales.

Individual insolvencies jumped by 44% year-on-year in September, to 10,651, new data from the Insolvency Service shows. That’s also a 6% increase compared with August.

This consists of 567 bankruptcies, 4,032 debt relief orders (DROs) and 6,052 individual voluntary arrangements (IVAs).

A DRO allows borrowers to write off personal debts they cannot repay (as long as they owe less than £50,000 and don’t have significant savings or an expensive car). They have been more popular since the £90 application fee was abolished in April.

An IVA is a court-approved agreement that stops a creditor charging interest on a debt or chasing the borrower, as long as they repay it.

A record number of UK firms are fighting for their financial survival as the uncertain economic outlook hits business confidence.

Restructuring specialist Begbies Traynor has reported that there were 632,756 UK businesses in ‘significant’ financial distress in the third quarter of this year – a 32% rise compared with a year earlier.

Significant’ financial distress increased in almost every one of the sectors covered by the latest Red Flag Alert survey.

It rose particularly rapidly among utilities companies (+19.3%), food & drug retailers (+10.4%), financial services (+9.94%) and bars & restaurants (+8.7%).

But, there was a drop 17% year-on-year drop in the number of businesses in ‘critical’ financial distress (close to insolvency).

Julie Palmer, partner at Begbies Traynor, says 2024 has been hard to navigate for companies, which have been hit by high inflation – and could face new taxes in the budget.

“With over 630,000 firms now in significant financial distress, more than thirty per cent higher than this time last year, no section of the country’s economy is immune from the legacy debt built up by many businesses during the pandemic.

“It is also apparent that the toxic effect of high inflation is still filtering down to businesses. The construction sector in particular continues to struggle with the legacy of high materials and labour inflation which have led to some high-profile insolvencies recently. This is a trend that I expect to continue, and I do not believe ISG will be the only major casualty in this sector with the domino effect likely to hit the sub-contractor community in due course.

“For some, the prospect of a change of government was viewed as a potential catalyst for a much-needed economic boost, but there are significant concerns surrounding what the next Budget might hold for the economy and the knock-on effect could be damaging for many businesses teetering on the edge of collapse, as it seems certain many will have to deal with higher employee related taxes.”

Here’s a breakdown of the top sectors for significant financial distress:

1. Support Services: 97,178 companies

2. Construction: 90,375

3. Real Estate & Property Services: 69,111

4. Professional Services: 52,082

5. General Retailers: 46,288

6. Health & Education: 41,222

7. Telecommunications & Information Technology: 40,817

8. Media: 26,389

9. Food & Drug Retailers: 19,260

10. Financial Services: 18,664

Here’s Moody’s Analytics economist Andrew Hunter on the rise in UK retail sales last month:

“The volume of U.K. retail sales rose 0.3% month-on-month in September, slower than the 1% gain in August but still rounding off a solid quarter of growth. Sales were boosted by big gains in spending at department stores and computing and telecoms stores, offsetting a slump in spending on groceries.

There isn’t much sign in the data that pre-Budget uncertainty is causing consumers to cut back on spending. Nevertheless, alongside slowing real wage growth and the still-restrictive level of interest rates, the likelihood of further tax rises being unveiled later this month is another reason to expect the U.K. economy to slow over the remainder of the year. “

Future shares dive as CEO steps down

Mark Sweney

Jon Steinberg, the former senior Mail Online and Buzzfeed executive who heads Marie Claire to Techradar owner Future, has resigned from the £1bn London-listed group after 18 months.

Steinberg, who joined in April last year replacing Zillah Byng-Thorne, has said he is resigning to relocate back to the US with his family.

Richard Huntingford, chair of London-listed Future, says:

“I would like to thank Jon for the significant contribution he has made to the Group. Whilst we are disappointed that he will be departing next year, we respect Jon’s decision to return to the US.

Steinberg will serve out his one-year notice period while a successor is found.

Shares in Future, which is valued at £1bn, fell over 10% following the news of Steinberg’s resignation, to the bottom of the FTSE 250 leaderboard.

Steinberg previously served as chief executive of Mail Online in North America, and was previously chief operating officer at Buzzfeed.

Before joining Future he held the role of president at cable operator Altice USA, which he joined when the company bought his digital news business Cheddar.