Logistics: Croydon

The UK transport and logistics industry employs around 2.3 million people. It is worth almost £75 billion to the economy, but its fortunes are closely connected to the country’s economic cycle. When economic activity is buoyant, demand for transport and logistics services is equally strong. Consumer and business demand for goods and services inevitably translates into higher demand for transport and logistics services.

But when economic activity is in decline, the situation can become critical – a situation not helped by soaring petrol prices. Indeed the continual rise in the cost in fuel has been cited as a contributing factor in the downfall of numerous firms in the sector, but for one company – Tag Transport Services Limited – it was not just the cost of fuel but rather a sudden reduction in orders from its clients that saw it enter into administration.

However, the quick intervention of SFP prevented this reputable freight transport company from going under and saved the jobs of 26 members of staff. Tag Transport Services, the former Palletways member based in Croydon, was a freight transport company that had an enviable client base. From its headquarters on the Airport Industrial Estate, Tag provided transport and logistics solutions through its fleet of 18 vehicles and turned over circa £2 million.

Despite this seemingly healthy trading position, Tag accrued debts of more than £700,000, some of which was owed in rent, and approximately £145,000 to Her Majesty’s Revenue and Customs (HMRC). Insolvency Practitioners SFP was appointed on January 11, 2013.

The company continued to trade while a buyer was sought, with SFP keeping the entire fleet of HGVs operational despite heavy snowfall over a number of days. All 26 of the employees were paid in full, retained and kept fully updated with regular meetings that ensured they were motivated and engaged with SFP’s plans, as SFP Group Partner Simon Plant explains: “In this instance the sale of an otherwise successful going concern was completed in little more than a week.”

The firm was bought out of administration by newly incorporated Diamond Distribution, a company managed by TAG director Geoffrey Phipps and office manager Keely Priestman.

“One of Tag’s major customers also offered to contribute a weekly sum to ensure that the company continues to trade, such is its importance to its own business continuity,” adds Simon.

He goes on to stress the importance of making provisions for the tax bill, as a number of firms owing money to the HMRC increases: “We see the debt owed to HMRC as a ticking time bomb that will explode and catch companies out if they have not made suitable provision in their cash balances,” he says.

“With four out of five instructions received by SFP in 2012 citing large debts to HMRC as a reason for struggling, businesses need to better protect themselves from potential financial troubles.”