Business moves in cycles. I believe that we are entering a positive period for real estate investors, developers and funders and so don’t want the content of this article to be viewed as negative.
On the contrary, what I’m trying to do is highlight opportunity. I like to think I have a strong sense of what the average UK consumer, and therefore the businesses that serve them likes. Before investing into BloomSmith my business was working with two million FCA regulated customers who had difficulty in meeting small personal payments. We all sometimes forget that behind the suppliers to retail businesses (for example in the property industry) there is always a dependency, ultimately on the consumer.
Begbies Traynor Group (BTG) reported there were 562,550 UK businesses in significant financial distress during Q3 of 2021. We must remember these figures are driven behind the scenes, by personal income. The BTG report also highlighted that CCJs are often a bellwether to the future. This latest insolvency data paints a gloomy picture. Official data shows there were 9,101 CCJs lodged against companies during Q3 2020, rising to 21,769 in Q3 2021, which is a 139% uplift.
In the end, every business insolvency is about people. The latest official figures show that Court activity is picking up as creditors become more aggressive in chasing debts. This is, in my experience and paradoxically, indicative of the beginning of a recovery.
Lenders do not aggressively chase debts when there is no prospect of recovery or potential to redeploy the funds positively. So, as lenders of VAT qualifying real estate transactions, why do we care? The answer is simple: distress, debt restructuring, and debt recovery actions, combined with the prospect of a welcome recovery, mean liquidity is important. BloomSmith cares because our business is to provide part of this liquidity fast, in the form of the 20% VAT requirement.
To add to the consumer picture and put real estate in context, I refer you to the findings of property agents, Eddisons. They recently shared with us how occupiers are now beginning to use physical environments to meet their multi-channel needs. They have also highlighted how the internet of things (IoT) and data, along with delivery technologies, are going to repurpose physical real estate.
This is, again, all about change and evolution, both of which require investment and liquidity. This will begin where there is most distress and the high street and retail in general is at the epicentre of this current consternation. We are optimistic for the future of retail because this transition is underway and some of our more prescient customers have been working with us to make sure they have all the liquidity they need to take advantage of this change.
“Lenders do not aggressively chase debts when there is no prospect of recovery or potential to redeploy the funds positively.”