What else do businesses need to be aware of?

2023 is shaping up to be the year when HMRC will focus their attention on recouping bounce back loans and putting additional pressure on directors and business owners who could already be struggling to make repayments. 

Pressure will be particularly acute from the beginning of April when the government reduces its energy bill support to businesses who, we should not forget, are still recovering from the impact of the pandemic and subsequent lockdowns. 

The hospitality, retail and construction industries are considered to be particularly vulnerable.  

These factors combined with weakening consumer demand and confidence will further distress these sectors. 

Many will already be paying back support they received to get through covid through bounce back loans and we are beginning to see that HMRC and the Insolvency Service are becoming more determined and aggressive in pursuing outstanding debts such as BBLS and other overdue repayments such as VAT or corporation tax.

The Insolvency Service is publicising more stories of their successful investigations against directors who have misused or committed other offences which have led to disqualifications, fines and in the most serious cases, incarceration. 

Winding up petitions are also on the rise as creditors are increasingly turning to legal enforcement to recover their outstanding debts. In the final quarter of 2022, there were 576 WUPs lodged by creditors – an annual increase of 131%. 

Additionally, there were 23,885 County Court Judgements (CCJs) made against businesses in the same period which is a 52% annual increase. 

Builders knocked down

One of the reasons why the construction sector will find itself under renewed and growing pressure in 2023 is that 632 of the companies that received CCJs against them for outstanding debts of £5,000 or more were builders. 

This in addition to new research that shows that more than half of all invoices sent to construction businesses last year were paid late.  

The total of 52.9% is a 13% increase from the 2021 total. 

In terms of late payments only the water and waste and mining and quarrying sectors performed worse. 

Brian Berry, chief executive of the Federation of Master Builders (FMB) said; “Late payments are a real issue for small, local builders who are cashflow reliant. 

“Unfortunately, the industry is facing a tough time with fluctuating prices with margins being squeezed as prices go up, which has led to increased insolvencies. SME builders are often at the bottom of the supply chain and can find themselves being paid late due to payment issues further up the chain, which is why it’s important that everyone is paid on time. 

“Unless the government ensures that the Prompt Payment Code is enforced then more jobs and company liquidations will be at risk.”

Cash flow is a critical concern for any business but especially SMEs.  A steady and reliable income stream is vital for any company to maintain operations and cover expenses.  

If payment is delayed, especially for a large order or project, or not received at all then it can create a significant financial strain causing them to possibly fail to meet their own financial obligations and further negative consequences beyond this. 

Some energy support will remain

Several representative industry groups have banded together to produce a joint letter to the business secretary asking for a rethink on the approach to energy support for various sectors including the approach of letting firms renegotiate contracts agreed when wholesale gas prices were at their peak last Summer. 

Wholesale gas prices began to rise in late 2021 and increased dramatically after Russia’s invasion of Ukraine in February 2022, peaking in August.  In recent weeks, these same gas prices have fallen but this reduction hasn’t yet fed down into domestic and business bills yet as suppliers bought their energy in advance. 

Signatories including the Association of Convenience Stores (ACS); the Federation of Small Business and UKHospitality, have estimated that businesses that signed fixed price energy contracts between August and October 2022 are receiving discounts of between 25% and 55% on electricity under the current scheme that expires in March. 

Under the new arrangement starting April 1st most businesses will receive discounts of only 0.7% and 2% off their electricity bills.  

The letter says: “We are urging the business department and Ofgem to encourage energy suppliers to allow the most vulnerable businesses to renegotiate or ‘blend and extend’ their energy contracts to reflect significantly lower wholesale prices now available.”

James Lowman, chief executive of the ACS said: “The government has failed in its attempt to come up with a plan for businesses that need urgent support on energy costs, instead opting for a scattergun approach that won’t affect the bills of thousands of shops facing huge hikes in their energy bills this year.

“Without urgent intervention to allow businesses to renegotiate fairer contracts, local shops will be forced to close their doors in numbers.”

Emma McClarkin, chief executive of the British Beer & Pub Association, said: “For many vulnerable businesses it will be the difference between being able to continue as a viable business and not.”

At the end of the first month of 2023, some directors and business owners could be forgiven for feeling surrounded. 

Even if they have enjoyed a good festive trading period, there is more peril gathering from seemingly every side with only two months more guaranteed energy bill support from the government and new tax bills waiting to be paid .

Not even considering existing liabilities such as bounce back loans, historic debts and ongoing liabilities. 

Fortunately, there is one thing that all savvy business owners and directors have in their favour and that’s time.  

Time to get some professional advice on what they can do, starting right now, to improve their financial situations.

We offer a free initial consultation with one of our team of expert advisors available whenever it’s most convenient by telephone or virtual meeting. 

There they will get a better understanding of the unique circumstances and challenges facing your business and will be able to work with you on a strategy to counter and overcome them.  

Implementing it will be your choice but the most important one you could make – today – is to get in touch and arrange this chat first!