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For instance, it’s common sense for builders, scaffolders and cement pourers to be classed together under construction but what about a travel agent and a security guard?

Or a car leasing company and a landscape gardener? Or an employment agency and a bouncy castle hire business?

They all come under the seemingly disparate title of administrative and support businesses which is a broad umbrella title that covers amongst others: 

So now we know which sort of businesses we’re talking about - how did they collectively manage during the year of lockdowns and afterwards?

Less is more

The initial figures show that in the year leading up to the first lockdown being implemented - Mar 2019 to Feb 2020 - there were 1,798 insolvencies involving businesses in the administrative and support sector. 

The immediate 12 months afterwards - Mar 2020 to Feb 2021 - saw 1,421 administrative companies close. 

Although this is 377 less, it’s still larger than might have been expected considering the temporary halt on creditor actions like winding up petitions and the range of additional support made available to businesses over the past 18 months.  

1,421 is a larger number than the losses reported by the hospitality and retail sectors, which were most popularly believed to be the worst affected in the pandemic with 1,378 hospitality companies and 1,355 businesses in the retail sector becoming insolvent. 

According to official statistics supplied by the Insolvency Service, there have been an additional 358 insolvencies in the administrative sector since March this year which takes the total number since lockdown to 1,779 - which is 118 a month or 29 a week shutting their doors. 

Did bounce back loans soften the blow?

The coronavirus jobs retention scheme or furlough, did help a lot of administrative businesses keep staff rather than forcing them to be made redundant. 

As the travel industry ground to a halt and nightclubs and other sectors that would usually require security staff didn’t need them, administrative businesses with no income needed support and quickly. 

The bounce back loan scheme and CBILS was rolled out for just such a purpose and these companies made use of it. 

The number of loans taken out by administrative services was 102,946 - more than the collective borrowing of the manufacturing, real estate and transportation business sectors. 

The total amount borrowed was £3 billion, which is an average borrowing amount of £29,141 per company.  

Under the most conservative official estimates, it’s expected that 15% of the total lent to the industry would remain uncollected would be £450 million but if the default rate rose to even 40% then this figure would also grow to £1.2 billion. 

You can still close your company even if you have bounce back loan arrears - find out how

Since pandemic restrictions began to be lifted, administrative businesses can begin trading again and supplying their valuable services to customers but there are storm clouds gathering on the horizon

The furlough scheme is finally being wound up at the end of September which means businesses either have to bring their furloughed workers back on full pay or implement redundancies. 

Any bounce back loan or CBILS arrears will continue to grow if they’re not being paid and any outstanding VAT arrears from their suspension in 2020 are now due too. 

Creditors will also be able to begin to take action to reclaim unpaid debts from September 30th too, allowing them to seek statutory demands and winding up petitions if not paid within 21 days of receipt. 

Chris Horner, Insolvency Director with said: “Administrative businesses have had one of the worst hands dealt to them during the pandemic and lockdown. 

“A lot of them didn’t qualify for any support other than bounce back loans and repaying these could become one of the biggest challenges businesses face this and next year if they aren’t able to trade like they did before. 

“The travel industry is still in flux to put it mildly, hospitality and nightclubs are just reopening but will need to comply with new rules and regulations shortly with little guidance being given to their security on how they will be implemented. 

“The shakeup in the commercial property sector will have big knock on effects for cleaning and landscaping businesses that service them so will make their financial forecasting nearly impossible to predict too.

“One thing administrative and service businesses can do is adapt and adapt quickly so they can use their talent and experience to take advantage of the little time left before September 30th and get some professional advice on how they can help themselves before so many rules change.

“A recovery strategy can work but only if it’s created and implemented now. This can include managing any unsustainable debt including bounce back loan arrears, VAT arrears or CBILS.”

A lot of people thought that by the end of September 2021, if not business as usual, we’d be at a stage of business getting back to usual. 

But for many companies and sectors - especially administrative and support businesses - it really isn’t. 

Debts have increased, more are appearing and the last protections from creditors are days away from being removed. 

There could still be a practical way forward for a business in this position but only if they take the first step and get in touch to arrange some practical, professional advice

We offer directors and business owners a free, initial consultation to set out their position and once we get a full understanding of the issues we face, we can work with them to create a strategy to meet and defeat these challenges. 

But get in touch today because after September 30th, the choices might be harder still. 

man working

We found several official projections indicating that billions of pounds lent under the scheme would ultimately not be repaid, with the losses equal to the cost of building between 6 and 23 Wembley Stadiums from new. 
In this blog, we’ll be focusing more closely on how small businesses in their individual industry sectors have embraced the scheme - how much has been borrowed, by whom and what the recipients have done with the funds. 

Can a business close down if it has an outstanding bounce back loan?

The data sources used to compile the various best and worst-case scenarios used in the projections are taken from the Office of Budget Responsibility’s Fiscal Sustainability Report; the latest BEIS annual report and the National Audit Office (NAO)’s regularly updated COVID-19 cost tracker. 
The industry lending breakdowns were compiled and published by the British Business Bank
Using this public data as our benchmark, we projected three different scenarios for defaults as outlined within them.
The scenarios set out a best-case (with a 15% BBL default rate); a median case (40% default rate) and a worst-case scenario (60% default rate).
We’ve taken a look at the total amount each sector has collectively borrowed under the bounce back loan scheme, the overall number of loans taken out, the average amount borrowed by a company in that sector and the default projections based on our analysis.

BBLS borrowing by sector

BBLS borrowing by sector

We can see that retail businesses - which include high street shops, shopping mall tenants and independent stores - borrowed a collective £7.7 billion which is higher than any other comparable sector.  Not unexpected as non-essential retail stores have only been allowed to reopen in the past week so have had less opportunity to trade offline, if they’ve traded at all. 
If businesses in this sector fail at the rate officially expected then we can see bounce back loan default losses ranging from £1.16 billion up to a high estimate of £4.6 billion.
Builders, fitters and other construction industry businesses are the next highest borrowing sector obtaining a collective £7 billion through the BBLS although this sector also saw the most individual loans taken out with over 238,000 bounce back loans being supplied to the various businesses.
The professional sector which also includes scientific and technical activities had the next largest borrowing requirement with a collective £4.5 billion lent to it and also saw the second-largest amount of individual bounce back loans granted with nearly 160,000 being granted.

What you need to know about company liquidation and bounce back loans...

Three sectors stand out above the rest when it comes to how much each individual business has borrowed on average. 
Shops and stores in the retail sector had the highest individual average figure with £35,530 borrowed. 
It’s hoped that April’s grand reopening and expected uptake in sales will help retailers be more successful in 2021 and insulate them from the negative effects when economic support measures are withdrawn later in the year. 
This was followed by the restaurants, hotels, cafes, pubs and bars that make up the hospitality sector. It’s arguable that these businesses have had the toughest 12 months under coronavirus trading restrictions so it’s no surprise that their average individual borrowing is as high as £35,503.
The third highest might be more surprising as it’s real estate companies. They borrowed an average of £35,080 per loan and while a large amount of their trade has moved online - a lot still has to be done in person whether it’s viewing properties, meeting agents to sign witnessed documents, financial and legal issues or being present but socially distanced when an agent conducts a tour of their property.
At the other end of the borrowing scale, businesses in the education sector borrowed the least on average with £23,238 per loan granted.
The next lowest were Arts and Entertainment companies borrowing £24,906 each and Transportation businesses borrowing £25,667 per loan. 

As the original and any topped-up bounce back loans start to come due for payment, we’ll have some idea in the coming weeks and months which sectors are best able to start paying off their support and which are still struggling to avoid liquidation.
Chris Horner, Insolvency Director with Business Rescue Expert, said: “The bounce back loans and other government backed support schemes have seen an unprecedented demand and take-up from small businesses, who may have had no other recourse to commercial finance.
“The early signs we are seeing in our own figures for small-company liquidations so far in 2021 are that already over 41% of companies entering liquidation have bounce back loans with an average balance outstanding of £37,350.
“We expected that the worst affected sectors such as retail, hospitality and construction would have had the most need for these funds and they will be the ones hoping for the quickest turnaround in fortunes now they can begin reopening and trading again. 
“But there are no guarantees of success or even survival for any business right now. 
“We’ve seen the corporate insolvency numbers start to rise again after being at historic lows and once support measures are withdrawn we can predict that they will rise even more as a result. 
“As the economy opens up, there is light at the end of the tunnel for those businesses in difficulty that have utilised bounce back loans.
"The coming months liquidation figures are likely to give the clearest indication yet as to just how well small businesses will recover.
“No matter which sector a business operates in, they have options if they’ve taken out a bounce back loan and think they’ll have trouble repaying it
By getting professional insolvency advice quickly, possibly before any potential problems appear, they will be in the best position to react and respond."

Business Rescue Expert is part of Robson Scott Associates Limited, a limited company registered in England and Wales No. 05331812, a leading independent insolvency practice, specialising in business rescue advice. The company holds professional indemnity insurance and complies with the EU Services Directive. Christopher Horner (IP no 16150) is licenced by the Insolvency Practitioners Association


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