Companies 'failing to invest enough'
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Your support makes all the difference.TRADE Indemnity, the insurance and credit risk company, yesterday warned that British companies are preferring to pay off their debts rather than invest in vital new equipment.
Vic Jacob, managing director, said: 'Business investment is not climbing. People are being very cautious about putting money into their businesses. It could cause a problem for the UK's competitive position if our companies don't have modern equipment.'
TI predicted that a 42 per cent fall in UK company business failures, reported by its customers in the first half of 1994, will flatten out in 1995.
TI compensates customers when their trade partners become insolvent. The recovery in the economy in the first half was translated into a 42.6 per cent fall in Trade Indemnity's payouts, totalling pounds 29.5m in the six months to 30 June 1994. In that period, company collapses reported to TI fell to 1,856 compared with 3,200 last time.
Although the company cannot report an interim pre-tax profits figure because of its three-year insurance cycle, Anthony Brend, chairman, said full-year profits would be up on 1993's pounds 5.8m.
The company announced its first dividend for three years, an interim payment of 0.4p.
Trade Indemnity suffered in the recession because of the number of business failures. Its worst year was 1991 when it made a pre-tax loss of pounds 46.6m.
Mr Jacob said that the one irritation in the results was an unexpected pounds 7.5m provision made necessary by an Appeal Court ruling.
The provision was linked to the bankrutpcy of 35 small financial services firms in 1991/2, following the collapse of their home income plans, under which pensioners sold their houses for a percentage of market value but retained the right to live in them.
TI's exposure stems from an insurance policy taken out with it by the Investor's Compensation Scheme. In June, the Appeal Court removed the scheme's freedom to put a ceiling on compensation claims. The company has petitioned the House of Lords.
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