Our third blog uncovers lessons to be learnt from UK airline Monarch that went bust on October 1st 2017. It was the UK’s biggest ever airline to cease trading and left over 110,000 people stranded overseas. Monarch employed 2750 UK-based staff, and almost all of them have been left jobless since its collapse.
However, according to Monarch, it was reasons mostly out of the airline’s control that caused it to fold, proving that external factors can swiftly tip a company from boom to bust. After its sale in 2014 from original Swiss family owners to the investment firm Greybull Capital, staff were forced to agree to a change in working conditions and accept pay cuts. Perhaps that was the beginning of the company’s struggle. Greybull commented that “factors outside of its control” ultimately caused the downward spiral, including terror attacks and ongoing threats, plus the fall of the British pound after the Brexit referendum.
Growing companies therefore need to consider now more than ever how best to protect their businesses from fluctuating circumstance in our increasingly interconnected world. Many elements are within reach.
Monarch was applauded for its excellent customer service, an area that smaller scale businesses can work to uphold too in order to secure return business.
Monarch’s markets in Tunisia, Egypt and Turkey were adversely affected due to political unrest and terror attacks. This consequented in Foreign Office advice to avoid travel to those countries, in turn causing consumer trepidation. But smaller businesses would likely be able to open up new markets more easily as they aren’t restricted by such large scale operations, like a global airline is.
When it comes to currency fluctuations, there is, unsurprisingly, nothing that growing businesses can do to control the strength of the pound. But taking out invoice insurance means that any work you have done, or will do, will not go unpaid in the case of a company becoming insolvent or suffering from protracted default. It protects against situations beyond your control, which is why more businesses are taking out invoice insurance cover with our team at InvoiceInsure.
On the positive side, the fall of business giants like Monarch often means that the Government gets given a timely wake up call to improve policies and mechanisms in preparation for when similar incidents happen. Following Monarch’s collapse, the UK government has mentioned plans to enable financially stricken airlines to continue flying, thus protecting passengers from being stranded by a sudden collapse. Hopefully similar considerations will be made to ensure smaller businesses aren’t left out to dry either.
Instead of everything grounding to a swift halt when insolvency happens, more forward thinking and contingency planning can lead to better managed folds in the future. Each of the last year’s high profile collapses, from Carillion to Toys ‘R’ Us to Monarch, offer various learning curves to traverse.
The constant advice from trade body the Federation of Small Businesses and insurance specialists the Association of British Insurers is that ambitious businesses need to do all that they can to protect against late payments.
It’s not just in the hands of the Government and policymakers. The Labour Party stated that Monarch’s collapse was “because of a litany of failure by government and regulators”. Responsibility is comprised of many players. But whilst the government plays catch up, invoice insurance cover remains the best way for dynamic and ambitious companies to protect, adapt and progress in today’s unpredictable business terrain. Don’t get left behind.
We’d be delighted if you get an invoice insurance quote for by clicking the link below – it’s a simple process and won’t take long.
Giulia Macgarr