AT AN Institute of Credit Management think tank meeting this week, it was clear that members representing insolvency practitioners, credit insurers and grass roots credit management are still scratching their heads over the relatively low insolvency numbers.

Historically, when the UK has pulled itself out of a recession, insolvencies have tended to rise.

During this particular credit crisis, insolvency stats were surprisingly suppressed, and in its aftermath, figures have continued to fall.

The mood among credit industry professionals seems to be one of cautious pessimism. Many still think that the number of business casualties will increase at some point, but I'm not too sure about this.

Due to a number of contributing factors, such as low interest rates, HMRC's Time to Pay scheme, and worries about the economy holding back many businesses' expansion plans, thus reducing the risk of over trading, maybe insolvency stats will remain muted.

If my last point is true, it may be good from a narrow insolvency stats perspective, but it won't do much to help drive an economic recovery of any note.

I AM INDEBTED to one of Graydon's clients who has pointed out something to me he had gleaned from a Graydon credit report.

The report was on a particular home furniture retailer whose profit margin was considerably lower than other companies in the same sector over the financial years of 2007, 2008 and 2009. Judging that in this current economic climate, any high street furniture retailer wanting to shift product would have to get involved in promotion led sales, he anticipated that this one would not be able to afford to offer generous discounts to reticent punters and would therefore struggle to compete.

Sure enough, the company concerned has just called in the administrator.

The British Retail Consortium and KPMG have just revealed that UK retail sales values declined year on year by 1.9% in March, the biggest decline seen since 2005. The high street's ongoing woes have been well documented in recent times, with some commentators pinning their hopes for the sector on a buoyant Easter and a feel good factor surrounding the upcoming Royal Wedding.

In all this gloom, however, we must all remember that even in a recession, only a small minority of businesses actually go to the wall. The management task, if you supply goods to the retail sector, is to be able to spot the bad'un.

Comparing a company's financials with those of its peers is certainly one way of helping the process along in order to avoid nasty bad debts.

WHEN ED DAVEY, consumer affairs minister, recently announced new proposals to improve the transparency of pre-pack administrations, he must have known that satisfying all interested parties would be a tough call.

A plan to give the outside world three days' notice that a company was destined for a pre-pack sale has its obvious advantages to unsecured creditors...or does it?

Yes, under the new proposals creditors would be able to apply to the courts to block a sale, they could decide to stop any more supplies from being dispatched, or could aggressively pursue retention of title rights on goods already delivered.

However, all of these could mean that the company fast approaching administration would be severely devalued, to the point where the administrator would have to let the business die. In this type of situation, how would that help unsecured suppliers? They would still be staring at bad debts.

Pre-packs, and their subsequent spawning of "phoenix companies", have been widely attacked by the credit management profession ever since they were first mooted. I don't think the credit industry has something against the whole concept per se; what it wants to see stopped is the pre-pack sale back to incompetent or untrustworthy directors.

Some honest hard-working small business people get into difficulty through a bit of bad luck, and even tough old trade creditors have empathy in these situations.
Perhaps an administrator should have to make a professional assessment of the director's business acumen before contemplating a pre-pack sale back to him? Would this be possible?

Unfortunately, too many pre packs become repeat business casualties within a year or two. That's why, in my opinion, there are some directors out there that shouldn't be given such easy second chances to screw up.

Photo by Eric Miller/World Bank

FOLLOWING IN the unfortunate footsteps of Victoria Wine, Wine Rack and Threshers to name but three financially stricken wine retailers of yesteryear, Oddbins has got itself into a poor state and may soon shut it's doors on many a high street arcade.

Citing "difficult trading conditions" as a reason for it's financial plight, Oddbins is desperately hoping that it's suppliers agree to a Creditors Voluntary Arrangement so that it can continue trading while restructuring takes place to make the business more viable.

If the CVA turns out to be impossible to put in place, the company will end up in administration next week.

Hopefully, Oddbins will survive. if it doesn't, we'll see another gaping hole appear on Britiain's high streets, alongside the still obvious retail shells left by Woolworths and Threshers, and other independent retailers suffering as a result of the economic slowdown and dropping consumer confidence.

Of course, it's a well-rehearsed argument that the mega supermarkets lie at the root of the problems facing independent high street stores. With their massive purchasing power, supermarkets can offer the lowest prices, and go out of their way to attract punters by making alcohol products in particular very cheap indeed.

I guess there's got to be some truth in this argument...law of the jungle and all that.

So long as supermarkets continue to expand and keep their customers and shareholders happy, they'll feel pretty good about themselves too. It may even make them feel better when they see how many charity shops are opening up in streets where other retailers closed down. Doing their bit for charity, some may say!