Just how many agency businesses are there in the UK?
The question has been promoted by an accountancy firm’s research into the number of estate agency businesses that it says are at risk of collapse.
Several publications simply lifted the press release by top ten accountancy firm Moore Stephens that claimed 19% of estate agents in the UK currently exhibit warning signs that indicate they are at risk of going insolvent.
However, we queried the numbers. We reported last year that according to the ONS there were 25,484 estate agency branches – but these were ‘shops’, not businesses.
Moore Stephens said there were 25,560 estate agents listed on Companies House up to the end of April, and 4,928 of these showed signs of financial distress.
A spokesman said this was worked out by looking at how long a company takes to pay its bill, how long it takes to get paid, how fast levels of debt are increasing, director resignations, and if there has been a drop in turnover of more than 10% in a year.
The more negative indicators a business has, the higher the risk of that business going insolvent.
EYE queried the 25,560 figure for the number of estate agency businesses because it is far higher than previous numbers given for the sector.
Both Rightmove and The Property Ombudsman, which claim overwhelming share in their respective markets, have fewer branches as members than has been claimed for the number of businesses.
Research by Trinity Mirror Group’s GetBucks regional newspaper in November 2015 found there were 16,547 businesses registered as estate agencies on Companies House. If both figures are correct, it suggests a jump of 9,000 estate agency businesses in under two years, and begs the further question that if there are now 25,560 estate agency businesses, how many branches are there?
EYE has seen other Companies House figures that show there were 25,090 businesses listed as real estate agencies in 2015, but it is unclear what this definition includes and some companies may be inactive.
There are other figures that contradict Moore Stephens’ numbers.
The UK’s biggest portal Rightmove hit a record 17,589 branches in its half-year results last week, and yesterday confirmed these were branches and not businesses. The Property Ombudsman, whose members make up 95% of the sales market, had 15,316 offices – again, branches and not businesses – as members at December 31, 2016.
Peter Knight, whose massive project – a new directory of top agents – has involved checking every single estate and letting agency branch in the UK, said yesterday evening: “We’ve assessed 26,000 branches but we count a branch twice if it offers sales and lettings so we have duals, sales-only, and lettings-only branches.”
He said that the number of businesses would be difficult to assess, as estate agents have so many different structures: “For example, some have a separate company set up for each branch, some for sales and lettings within the same branch. Also, you have businesses with self-employed people working under a brand plus franchisees with their own companies.”
Its research goes on to claim that high street agents are seeing their profit margins being squeezed by online firms such as Purplebricks, HouseSimple and eMoov, but there doesn’t seem to be any analysis of these companies’ profits or debt levels.
The accountant also claims the growth in portals such as Zoopla and Rightmove made it easier for potential buyers to browse and view homes without the help of a professional, despite the portals only accepting listings from agents to whom they send leads.
It also warned that smaller high street agents have had their margins squeezed by larger national agency businesses, such Countrywide and Connells, claiming they can allocate “substantial budgets” to marketing and advertising.
Mike Finch, restructuring and insolvency partner at Moore Stephens, said: “Traditional high street estate agents’ profit margins are being squeezed from both sides – from cut price online competitors, to their larger counterparts on the high street – who are forcing them to up their spending or give up the race.
“Many areas across the UK are over-saturated with estate agents, and competition is becoming too much for some smaller businesses.”