UK corporates are wasting £2bn a year
May 05, 2015
Is corporate simplification sufficiently high up the board room agenda for your organisation?
The number of companies on the UK register currently stands at some 3.4 million. Despite record levels of unwanted, dormant or insolvent companies being removed, the rate of incorporations currently outnumbers dissolutions by a staggering 200,000 per year. If this rate of expansion continues, the number of UK companies will break the 5 million barrier by the mid-2020s.
But how many of these companies serve a useful purpose and how many of them are completely surplus to requirement?
Dormant or surplus?
While, at present, only one in seven of those companies is formally marked as 'dormant' by Companies House, it is widely accepted that a much greater proportion are in fact redundant and no longer required. However, even at 'one in seven', there are just short of 500,000 dormant UK entities registered at Companies House.
Informal research consistently indicates the cost of maintaining a single UK company to be £3,000 - £5,000 per year. As a result, UK corporates are currently wasting £2 billion maintaining these entities; money which could be much better spent.
Getting rid of surplus
Corporate simplification - the elimination of surplus companies through solvent liquidation or strike off - is increasingly a topic being discussed in the board room, especially where merger and acquisition (M&A) activity has resulted in a cumbersome group structure chart. The good news is that a well-planned and implemented simplification exercise can have a payback period of just 12 to 18 months.
Even with the increasing popularity of the strike-off procedure, many groups are still sitting on, and paying for, surplus companies in their portfolio. This not only creates a burden for government agencies but also represents a material cash cost for virtually every UK corporate. So it’s timely to ask yourself … is corporate simplification sufficiently high on your board room’s agenda?
Find out how best to go about corporate simplification in my blog on the 10 keys to a successful corporate simplification project.
How many companies in your group or portfolio are surplus to requirements? How much could you save by eliminating them? Share your thoughts below or schedule a meeting to discuss your situation in confidence.