In physics, there are five states of matter known as solid, liquid, gas, plasma, and more recently Bose-Einstein condensates! To explain an economic principle, many an intellectual will look to reference one of these states to make it more relatable. In this article, we look at the unofficial sixth state of matter as an analogy for the UK economy.
For a moment, picture the economy as a sentient entity that can transition between the other five states of matter. That entity sits greater in size outside the box and yet can fit perfectly inside any volume of box as if it were at one with the corrugated sides. In times of recession, the entity can fill a smaller box until a larger one becomes available through economic growth. The box and entity are different but also inseparable. That entity and unofficial sixth state for our (admittedly left field) economic analogy is a cat.
It follows that businesses will grow to fill the space immediately created by a growing economy. Some businesses achieve this through organic growth and others look to investors. Some look to sell themselves to an affluent purchaser who can more readily inject the cash required (as was the case for F1 team Williams Grand Prix Engineering and Dorilton Capital). Creditors rightly get nervous if their debtor is looking for investment. Outside the boardroom, it can be difficult to tell if the debtor is hunting funds for short term survival or long-term growth. Because the liability to pay remains with the company originally contracted, the presence of investors or new owners does not affect your right to recover payment. Waiting on investor funds is not a new excuse. It’s certainly not a barrier for third party debt collection. Advocate’s instruction is usually sufficient for funds to be miraculously found without court proceedings being issued, so as not to scare off the inbound investor. Sometimes the mere mention of a debt collection agency such as Advocate will spurn the debtor into making payment. In recent months there has been a spate of new investors and acquisitions as businesses look to fill the space being created by a growing UK economy – these include:
House and Home
Following sustained growth since 2020, pet nutrition company Butcher’s Pet Care has recently secured £43 million from investors. This will help the business ramp up production to meet demand and develop new pet foods. London based sustainable stationary producer Papier has raised $50m to increase production capacity in line with demand on American shores. The unique product offering and resurgence of the sector has seen revenue grow 150% since 2020.
Leeds based Boxt has secured £20 million of investor funding to help it keep up with increased demand. The firm provides fixed-price low-hassle installation of boilers, air conditioning units and EV charging points to consumers. These are high-value items to carry in stock before revenue is realised through installation. Home contents and buildings insurance provider Locket has raised over £1 million through crowdfunding. Locket is a market disruptor with a very different approach to calculating risk and premiums. Discounts are given based on what smart technology is in place and how it makes the home more secure and less accident-prone.
Nutrition and Hospitality
Personalised vitamin producer Vitl secured £6.5 million from investors in February 2022. The business experienced organic growth throughout the pandemic because of consumers prioritising health. The investment will help the company to increase production. It’s not just the wellness sector that has seen growth. Nutrition focused meal box subscription service Gusto saw revenue double in 2020. To enable the next stage of growth the London based company is to benefit from $150 million of investor money taking the valuation well into ten digits. Brasserie Bar Co run by renowned Michelin starred chef Raymond Blanc was sold by investment firm Soho Square Capital to competitor Alchemy Partners. Unconfirmed reports suggest the business was valued in the region of £40 million. The hospitality industry was rocked by the pandemic. Expansion will inevitably require deep pockets to achieve their five-year growth plan, including opening more pubs under the White Brasserie Co brand.
Money and Finance
Premium bonds are nothing new if a little dated for Generation Z. That was until a company called Everything decided to reinvent the wheel and secured £1.67 million from angel investors in January 2022. Development and rollout in the financial sector are not for the faint of heart. Pairing a debit card with cash back rewards and a risk-free way of saving is a combination not seen before. ThinCats is an alternative lender for small and medium-size companies. They have seen unprecedented demand in applications. Loans are either fulfilled through ThinCats’ own resources or those of institutional investors. To support this growth Insight Investment have injected £100 million for loans as a joint venture with ThinCats. Payment firm Checkout has raised £730 million to fund growth in the US market. The London based business provides a payment interface for B2C websites and cryptocurrency exchanges. Since being incorporated in 2012 Checkout has gone from start-up to the UK’s most valuable financial tech firm (2021) with a £29 billion valuation.
The Tech Sector
Less than six weeks after being released word game Wordle became a viral phenomenon with two million downloads. Just three months later in February 2022, the game was sold to The New York Times Company for an undisclosed seven-figure sum. The NYTCo also recently acquired a subscription-based sports website The Athletic for £400 million which has been trading since 2016 attracting a million pay monthly readers. The NYTCo already has over eight million subscribers providing Wordle and The Athletic with instant access to a much wider audience. Children’s IT training company Fire Tech was sold in January 2022 to the owners of MyTutor for an unconfirmed £15 million. Fire Tech is expected to benefit from MyTutor’s remote learning offering and increase its market share.
Autonomous vehicle (AV) start-up company Wayve has recently received an investment of £147 million with funding to date exceeding £190 million. Wayve wants to do away with the laser bounce back technology (sonar-like) in mainstream AVs, and replace it with a better, cheaper, camera-based system capable of learning on the job. BritishVolt secured a £40 million investment from Glencore in February 2022. The business is planning to manufacture EV batteries in the UK with an eye on sustainability. It is one of several expected rounds of funding for a start-up valued in excess of £700 million. As demand increases for EVs, the company is primed to fill the larger economic space.
Cogito Ergo Sum
Although some of the investments made are US dollars, all these sixth state companies are UK based or have a significant presence here. They are all looking to fill the space created by a growing economy on the back of investment. It can take years for start-ups to make a profit, and a day for even the most affluent of businesses to find themselves under threat from bad debt. Unless you are a philanthropist, there is no moral conflict when trying to recover payment from a start-up, tech unicorn, market disruptor, environmental pioneer, or cultural lynchpin. No matter what moniker investors and directors place on the business, Advocate’s debt recovery process is just as effective at recovering payment of your overdue invoices. After all, a debt is still a debt and your right to recover payment remains unchanged. This right is as appreciated as Descartes’ assertion of cogito ergo sum, or in plain English, I think therefore I am. Get in touch with Advocate to see how we can assert your right to recover payment in accordance with current late payment legislation.