Business Updates: Public Sector Procurement, Insolvency Risks, Industry Shifts, and Key Legislative Changes

Welcome to our round-up of the latest business news for our clients. Please contact us to discuss how these updates might impact your business. We are here to support you!

Public Sector Procurement: Missed Targets and Opportunities for SMEs

A recent report by the British Chambers of Commerce and Tussell has highlighted the ongoing challenges the public sector faces in meeting its procurement targets for small and medium-sized enterprises (SMEs).

Despite the UK government’s commitment to increasing the procurement of goods and services from SMEs, the numbers reveal a persistent shortfall. In 2023, only 20% of the total direct procurement spending in the public sector went to SMEs, amounting to £39.7 billion out of £194.8 billion.

An Overview of the Current Situation

The report shows that while the overall value of public sector spending with SMEs has increased by 77% over the past six years, the proportion of total procurement spend directed to SMEs has remained essentially unchanged. Local government fared better than the central government in this regard, with 34% of its procurement spend going to SMEs, compared to a mere 2% in some individual central government departments.

In conclusion, SMEs continue to face significant barriers in accessing and winning public sector contracts. The complexity of procurement processes, high bid costs, and the recent dominance of large procurement frameworks have made it difficult for smaller businesses to compete with established suppliers.

Could the New Procurement Act Provide an Answer?

The Procurement Act, which received Royal Assent in October 2023 and will come into effect in October 2024, aims to address these challenges by opening public procurement to SMEs and social enterprises. The Act introduces a more flexible and streamlined procurement system focusing on transparency and fairness.

Key provisions of the Procurement Act include:

• A central digital platform: This new platform will provide details of all public sector tenders, making it easier for SMEs to find suitable opportunities and compete for contracts.
• Simplified processes: The Act aims to simplify procurement procedures, making it less daunting for SMEs to participate.
• Mandatory feedback: Public bodies must provide feedback to unsuccessful bidders. This will help SMEs understand how to improve their future bids.
• National Procurement Policy Statement: This statement will guide contracting authorities in levelling the playing field for SMEs by removing unnecessary barriers and avoiding disproportionate contract requirements.

What Proactive Steps Could You Take?

If the Procurement Act successfully reshapes public sector procurement, you could have a significant opportunity to increase your business. Here are some proactive steps you could take to become a public sector supplier:

1. Familiarise yourself with the Procurement Act: Understanding the changes introduced by the Act will be crucial. Keep up-to-date with developments and guidelines as they are released, and prepare to take advantage of the new digital platform once it is live.
2. Engage with procurement frameworks: Although they have been seen as a barrier, they also present opportunities. Seek to understand how these frameworks work and explore how to join them, potentially in partnership with other businesses.
3. Invest in bid preparation: The quality of your bid is crucial in securing contracts. Consider investing in resources or training to improve your bidding skills, including understanding the specific requirements of public sector contracts and how to meet them.
4. Seek feedback and adapt: Take advantage of the mandatory feedback provision under the new Act. If you make an unsuccessful bid, use the insights you will now get to refine your approach and increase your chances of success in future tenders.
5. Network and collaborate: Building relationships with larger suppliers and other SMEs can lead to subcontracting opportunities or joint bids, which can be particularly beneficial when tackling larger contracts.
6. Leverage local government opportunities: Since local governments spend more with SMEs, they may offer a more accessible entry point for you. Focus on building relationships with local authorities and exploring contracts that are well-suited to your business’s size and capacity.

While the public sector has fallen short of its procurement targets for SMEs, the forthcoming changes under the Procurement Act present promising opportunities. By understanding the new legislation and taking proactive steps, you will be able to better position your business to win public sector contracts and contribute to its growth in this evolving market.

See: ICADEW

Companies Undermining the Insolvency Regime Are Closed Down

In a recent case reported by the Insolvency Service, two connected corporate rescue firms, Atherton Corporate (UK) Ltd and Atherton Corporate Rescue Limited, have been forcibly shut down by the UK courts.

These companies, trading under the Atherton brand, claimed to offer business owners struggling with debt a legal alternative to formal insolvency procedures. However, they misled their clients by encouraging them to sell their financially distressed businesses in a way that allowed them to avoid liquidation and retain company assets without taking responsibility for the company’s debts.

Five associated companies supported the scheme. They bought these distressed businesses and appointed new directors to distance themselves from the original owners and any future legal actions.

Mark George, Chief Investigator at the Insolvency Service, commented on the case, highlighting that this scheme was an attempt to help former directors and owners disassociate themselves from their company debts while retaining any assets. He stated: “These actions would appear to have deliberately undermined the insolvency regime, which is why the Secretary of State applied to have them and their associated companies wound up in the public interest.”

Why This Case Matters: The Risks of Avoiding Proper Insolvency Procedures

For business owners and company directors, this case serves as a stark reminder of the importance of adhering to the correct legal procedures when considering the dissolution of a company.

Attempting to sidestep formal insolvency processes can lead to significant legal consequences, including personal liability for debts, reputational damage, and even criminal charges.

Key Takeaways for Company Directors

If your trading company is facing financial difficulties, this case highlights some crucial points to remember:

1. Understand Your Obligations: The actions you take if your company is going insolvent are crucial. Seek advice from a qualified professional, especially a licensed insolvency practitioner, to navigate the complexities of insolvency law correctly.
2. Avoid Misleading Schemes: Be cautious of any service that promises a way to dissolve your company while avoiding your responsibilities. If it sounds too good to be true, it probably is.
3. Follow the Law: Properly dissolving a company through established legal channels ensures that all creditors are treated fairly and helps you avoid personal liability. Trying to circumvent these processes can result in penalties and damage your reputation.
4. Seek Professional Advice Early: If your business is struggling, getting help early can often make a difference. You may have options to continue your business without going insolvent. Address issues head-on with the help of a professional rather than delaying and risking more severe consequences later.

If your company is experiencing financial difficulties, we understand how stressful this can be. Book a free consultation anytime for advice that can help you protect yourself and potentially aid in your business’s survival.

See: Gov.uk

Companies House Online Services to Move to GOV.UK One Login

Last week, Companies House confirmed that their online services will transition to the GOV.UK One Login starting from autumn 2024.

The GOV.UK One Login is becoming an increasingly essential tool for accessing government digital services. With this system, you will only need one account, one username, and one password to access a wide range of government services.

The Login is already utilised for several government services, including those related to being an apprenticeship provider, applying for grants, and, in Wales, managing fishing permits and catch returns.

Ultimately, the GOV.UK One Login aims to become the gateway to all GOV.UK services, which will eventually include tax services. The migration of Companies House services to this platform represents a significant step towards this goal.

The “Find and Update Company Information” service will be the first to move, with the “Webfiling” service transitioning at a later date.

In line with the changes introduced by the Economic Crime and Corporate Transparency Act, individuals who set up, run, or control a company in the UK will need to verify their identity. The GOV.UK One Login will facilitate this verification process, allowing users to confirm their identity through the platform.

If you need any assistance with your company secretarial requirements, please don’t hesitate to Book a free consultation. Our team is happy to help!

See: Gov.uk

Barratt Developments’ profit drop sends ripples through construction and property sectors

Barratt Developments, the UK’s largest housebuilder, has reported a significant decline in pre-tax profits, down by three-quarters for the year ending June 2024. This comes as the company completed just 14,000 homes, a sharp decrease from 17,000 the previous year. Forecasts suggest even lower figures of 13,000 to 13,500 homes for the upcoming year.

For businesses in the construction and property sectors, this slowdown could signal challenging times ahead. High interest rates deter potential buyers, while inflation pushes up costs, creating a ripple effect across the supply chain.

If housebuilders are scaling back their operations, then construction firms, contractors, and suppliers of building materials may need to brace for a demand reduction.

Architectural firms, estate agents, and mortgage brokers may also need to consider strategies to maintain profitability if project pipelines thin and fewer new homes enter the market.

The new Labour government’s ambitious plans to build 1.5 million homes over the next five years could counter current estimates if the suggested planning reforms, green belt adjustments, and mandatory housing targets for local authorities are effectively implemented.

While these reforms are being welcomed, analysts suggest that further easing of mortgage rates is needed before activity will pick up significantly.

See the full article on the BBC News website.

Plan 1 student loan interest rate to change to 6%

The Plan 1 student loan interest rate was reduced to 6% (from 6.25%) on 30 August. This rate change applies across the UK, with the Department for Education (DfE), the Welsh Government, and the Department for the Economy in Northern Ireland (DfE NI) all confirming the change.

The reduction follows the Bank of England Base Rate changing to 5% earlier in August.

Those running payrolls and payroll bureaus should notice a reduction in student loan deductions for relevant employees in their September payrolls. If not, you may need to confirm that your payroll software has been correctly updated.

See the full announcement on the UK Government website.

Norfolk and Suffolk declared a restricted zone for bluetongue virus

The UK Chief Veterinary Officer has declared a bluetongue restricted zone across Norfolk and Suffolk following several confirmed cases of Bluetongue virus BTV3 in the region.

Since 30 August, all keepers of cattle, sheep, and other ruminants and camelids in this area must follow strict restrictions on animal and germinal product movements. Essential movements of these animals within the Norfolk and Suffolk restricted areas can be done without a licence, but they cannot be moved to another area without a specific licence.

The bluetongue virus is primarily transmitted by midge bites and doesn’t affect people. Meat and milk from infected animals are safe to eat and drink. However, it can reduce milk yield and even be fatal to susceptible animals.

Based on current temperatures and midge activity, there is concern that there is a high risk of onward spread. Farmers are encouraged to monitor their animals frequently and report any suspicions of the disease.

The UK government’s guidance on bluetongue provides more information about the symptoms of bluetongue and how to spot and report it.

See the full news release on the UK Government website.