Stable businesses must be incentivised to pick up failing competitors, says business expert

CANTERBURY, U.K. - April 7, 2020 - PRLog -- Tens of thousands of more secure businesses must be encouraged to buy distressed enterprises to give the economy a boost as it faces the economic fallout from the pandemic, according to Alan Davidson of Canterbury-based Pentins Business Advisers.

Supported by research from The Corporate Finance Network, he said: "I believe stable firms can play a role in helping the economy by making acquisitions. The issue is that we are not an acquisitive nation. SMEs rarely buy other businesses.

"There were less than 5,000 deals across the UK in the past three years involving SMEs (small and medium-sized enterprises) with less than £25m turnover. The natural course of business will not help this dire situation.  We need the Government to put in a series of incentives to really encourage mergers and acquisitions, so struggling business owners do not just shut down their business and make their workforce redundant. "

He added: "We need to do something which encourages maybe 250,000 businesses to make an acquisition of a failing business in their sector, or even a different sector, to diversify."

The Corporate Finance Network reported last week that 18% of businesses were likely or probably going to fail and this helped convince the Chancellor an overhaul was required of the support offered.

They have now proposed to the Treasury that Local Enterprise Partnerships should be given more money for companies willing to safeguard jobs, and a tax incentive should be put in place with HMRC to help reduce the risk of buying a distressed business, which will then need considerable work and skill to be turned around.

The Chancellor recently announced an "unprecedented" package of support for workers and businesses to help them cope with the coronavirus pandemic.  Support for businesses already announced by the Chancellor includes providing £330 billion in business loans and guarantees, paying 80 per cent of the wages of furloughed workers for three months, VAT and tax deferrals, introducing cash grants of up to £25,000 for small business and covering the cost of statutory sick pay.  But concern is that these aren't sufficient and are not meeting the SME economy's needs, who are reluctant to take on more debt at this uncertain time.

SMEs account for 99.9% of the private sector employment in the UK and there are 22 million employees working for these private sector businesses.

Pentins Business Advisers (https://pentins.co.uk/) are Chartered Accountants and Business Advisers in Canterbury, Kent. Pentins provide compliance and advisory services for SMEs, to help them grow sustainable businesses.

If you would like more information or to arrange an interview with Alan Davidson, please contact adavidson@pentins.co.uk