It has been wideley reported in the media that Albany Group, who provide UK umbrella services and overseas payroll solutions, has appointed administrators. It is believed that some companies within the group have recently experienced severe cash flow difficulties as a consequence of their bankers reducing the level of their funding.
Albany is unusual for an umbrella company in that it has certain operations that require it to pay its contractors before the agency or client is contracted to pays its bills. So, like most recruitement agencies, it has to get funding, known as factoring or invoice discounting, from it bankers. It is as a consequence of tighter financial markets that Albany has found itself exposed.
It is less likely that another umbrella company will be next to hit the headlines, but very possible that an agency suffers the same fate. Exposure is high where an agency is overly dependent on one, or a few, end clients and where it has lots of overseas clients. An additional area of concern later in 2010 may come where an agency has a lot of governement contracts if budgets dry up due to recessionary cuts.