Annual Review / Preview Event 2024 event summary

On 10th January TMA UK welcomed over 100 restructuring and turnaround professionals to the Annual Turnaround Review / 2024 Preview kindly hosted by Howden.

Expertly compered by TMA UK director Andrew Pepper, the panel consisted of a panel of experts sharing their thoughts on distress and turnaround in 2023 and looking ahead to 2024, including:

• Joanne Rumley – Restructuring Partner, Foot Anstey and current TMA UK President
• Elizabeth Howlett – News Editor, Drapers
• Ed Brittain – Executive Director (Restructuring & Resolution Team), Howden
• Stephen Jacobs – Director, Christie & Co

What did the panel experience in 2023?

The changing appetite of lenders was a common theme shared by the panel, with Joanne experiencing sharp changes in lending practice by traditional high street lenders who are exiting specialist industries in favour of more traditional markets. This has created difficulties for otherwise profitable and stable businesses who have their finance withdrawn at short notice.

This change of position from the primary market has helpfully led to the growth of a wider market for secondary and asset based lenders to plug these gaps, with new lenders seemingly arising on a regular basis.

In the market for business and property sales, Stephen confirmed that deal activity in 2023 reflected the obvious challenges throughout the year, in particular ongoing inflationary changes, interest rates rises and the increased cost of lending. Although instructions remained at a similar level to 2022, these challenges led to a significant decrease in business and asset sales in 2023. After two years of growth, data tracked by Christie & Co illustrated that sale values reduced by 3.5%.

As a sign of the difficult trading conditions, Christie & Co experienced a 75% increase on insolvency led sales, representing 10% of total sales in 2023 (a rise from 3.5% in 2022).

These views were shared by Ed who reported a significant decrease in sales for business sale warranty insurance, and a steep increase in insolvency related insurance.

Although still at a formative stage, 2023 was earmarked by the rise of Artificial Intelligence (AI), with both Elizabeth and Ed reporting challengers utilising AI to disrupt traditional markets.

The insurance market has seen AI being used to create and underwrite insurance policies, creating a submarket of quick and cheap policies. Whilst undeniably cheaper, they lack the bespoke cover available from traditional insurance policies. Laden with exclusions aimed at making them cost effective, they are effectively useless in many situations, such as in the event of insolvency or when the insurer is subject to insolvency type events.

In the fashion market, Elizabeth reported that the entrance of Shein in the fast fashion market has caused ripples amongst household names, such as Boohoo and Misguided. Its use of AI to identify and release new lines almost immediately was described as both “amazing and terrifying”. With the rest of the market aiming to catch up, 2024 is likely to be hotly contested in fast fashion.

What are the hot turnaround sectors for 2023?

Stephen anticipates a busy year for the care sector, with many large operators struggling, a variety of prime locations up for grabs, and subsequent opportunities for smaller regional owned managed businesses in the market. The likely ongoing increase to mortgage and lending rates will only serve to fuel this further.

Elizabeth has yet to see an improvement in day to day finances, particularly household incomes which are so important for the fashion and retail markets. The fashion markets in particular experienced very difficult trading conditions over Christmas and New Year, with ongoing sales and discounting used to encourage sales.

Her discussions with CEOs in the industry suggest that they have some optimism with green shoots appearing, although the current difficulties with trade and shipping in the Red Sea has separately caused concern amongst manufacturers.

In the insurance markets, construction is expected to maintain similar levels of activity. Whilst Ed is buoyed by the range of finance currently available and likely to improve over time, he too continues to see a considerable amount of distress across all major sectors.

After spending time out of work on sabbatical, Joanne has first-hand experience of the ongoing developments in the employment market, in what has become a tight labour market. Joanne foresees more and more investment in skills improvement and training which will lead to a lot of interest in the adult education industry. Similarly, as regulatory obligations increase, she foresees growth in the support and advice services provided to regulated entities, such as those regulated by the Financial Conduct Authority.

Positives and negatives for 2024?

Unsurprisingly, many of the panel still foresee a considerable amount of distress on the horizon. Stephen and Elizabeth foresee further distress for the casual dining and fashion markets, with the improving financial position yet to be felt in the pockets of the average consumer. With ongoing consultation in the litigation funding industry, Ed foresees some turbulence in that market.

Both Stephen and Ed hope that with inflation reducing faster than anticipated, 2024 will provide greater access to finance to fuel acquisitions, sales and investment, which in turn will hopefully lead to wider economic recovery and the return of consumer spending.

We cannot discount however, as Ed warns, the potential uncertainty created by UK, US and Russian elections, all taking place in 2024.

Joanne anticipates that 2024 will see a rise in bureaucracy and overall scrutiny of directors and boards, particularly around corporate governance, corporate directorships and shareholder transparency. The availability of good advice will therefore become more relevant than ever.

Overall Andrew and Joanne anticipate a busy and productive year for turnaround professionals in general, with greater opportunities for investment and expansion and an opportunity for advisers to add real value to businesses. Now more than ever, with greater guidance on the use of moratoriums, restructuring plans, creditor pooling and cross class cram down, the industry genuinely has the tools available to create positive outcomes for business.

Thank you to our panellists for sharing their excellent insights on an interesting year for business, as well as their predictions for the year to come. We hope you’ll join us for more TMA events in 2024, many of which will be in person. Visit the TMA UK website events page to see what’s coming up.