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End of the line

There are still local spikes here and there all over the UK and as we enter the traditional winter flu season, there might be temporary measures deployed if coronavirus cases rise sufficiently.

The government has also declined to implement planned vaccination passports for people attending large events in England so individuals and businesses could now begin to plan their Autumn activities with more certainty. 

Against this backdrop it’s been confirmed that the various remaining pandemic support measures including the coronavirus job retention scheme or furlough will definitely end on September 30th along with a lifting of the ban on winding up petitions.

While it was expected that creditors would be able to seek winding up petitions once again, there’s been a sizable catch - so that now bringing a winding up petition is literally a £10,000 question. 

New legislation to be introduced in parliament shortly will:

These measures will remain in place until March 31 2022.

Business Minister Lord Callanan said: “The time is right to lift the insolvency restrictions that were needed during the pandemic. 

“At the same time, we know many smaller businesses are rebuilding their balance sheets and reserves, and some will need more time to get back on their feet. These new measures and protections will help them to do that.”

The minister said that businesses should pay their contractual rents where they’re able to do so and also confirmed that existing restrictions will remain in place on commercial landlords from pursuing winding up petitions against limited companies to repay commercial rent arrears built up during the pandemic.

Additionally commercial tenants will continue to be protected from eviction until March 31 2022 while a rent arbitration scheme to deal with commercial rent debts accrued during the pandemic is implemented.

One measure not time bound by restrictions are new legal powers given to the Insolvency Service which allow them to retrospectively investigate the conduct of directors of dissolved companies. 

If they can prove that directors were dishonest or culpable in behaviour which led to their company’s failure then as well as being made personally liable for any debts incurred, they can be disqualified from acting as a director for up to 15 years. 

This includes bounce back loans so obtaining professional advice is critical if you’re thinking of closing your business.

Chris Horner, Insolvency Director with BusinessRescueExpert.co.uk said: “The new £10,000 threshold for winding up petitions sounds like a big increase from the previous minimum level of £750.

"But in reality, due to the associated expense in issuing winding-up petitions, the vast majority of pre-COVID winding-up petitions were over the new level in any event.

“Eager creditors will examine their options carefully and look to use whatever leverage they have.

“Hopefully, many companies use the new 21 day period to negotiate sensible repayment plans. Seek expert help if in doubt about how best to approach this.

“Like the insolvency moratorium that’s automatically granted if a company goes into administration, this provides valuable breathing space and time for a business to come up with plans to deal with problematic debt.

“This includes outstanding bounce back loans or VAT arrears - they haven’t been suspended - and a business can still close down, even if a company has these debts but only if it’s done using the right method overseen by an insolvency professional.

“For example, If a business with unsustainable debt wanted to close and started the process in the next couple of weeks - it could probably be concluded before Christmas, leaving the directors or owners free to begin a new venture or career in 2022.”


Why you should pay to liquidate your business


Time is only an asset if it’s used effectively. 

The 21-day negotiation period of winding up petition restrictions and £10,000 floor is only useful if you take advantage and get professional advice now because it will, like all the others, cease eventually. 

We offer a free initial consultation to any business owner or director who wants to know the best way to close their company or if possible, restructure and keep it alive, even if it has debts.

Once we get a better understanding of the situation, we can come up with a tailored solution possibly with more options and choices than you thought you had. 

But this is only possible if you use your agency and get in touch.

Endgame

The report found that although essential, the government’s overall response to the pandemic had exposed the taxpayer to significant financial risk for the foreseeable future and that while departments faced difficulties in responding quickly to the pandemic, these risks did not always achieve good value for money. 

The committee singled out the bounce back loan scheme as one of the programmes with a high level of risk reporting an estimated £26 billion of credit and fraud losses uncovered so far. 

Dame Meg Hillier MP, Chair of the Committee, said: “With eye-watering sums of money spent on Covid-19 measures so far the government needs to be clear, now, how this will be managed going forward, and over what period. 

“The ongoing risk to the taxpayer will run for 20 years on things like recovery loans, let alone the other new risks that departments across government must quickly learn to manage.

“If coronavirus is with us for a long time, the financial hangover could leave future generations with a big headache.”

Among the main conclusions and recommendations in the report are:

The report also highlighted the work of the National Audit Office’s (NAO) Covid-19 cost tracker which tracked expenditure and costs across the whole of government and pulled them together in one place. 

The NAO are working on a follow-up to their October 2020 report specifically into the bounce back loan scheme.

It is scheduled to be published in the winter of 2021 and will update their findings on the overall amount of bounce back loan arrears that have been repaid to date and how much remains outstanding. 

We’ve been reporting on bounce back loan arrears and repayment scenarios since April including regional and industry differences so know that whatever number they come up with, it’s going to be big and focus will then shift from data collation to debt recovery.


Businesses with bounce back loan arrears are being stopped from closing down


HMRC and the Insolvency Service are going to be very busy for the rest of 2021. 

They are already using their existing powers to close down businesses and sole traders who falsely obtained bounce back loans and are turning their attention to companies who took them out legitimately but have built up arrears. 

A recent FOI inquiry from BusinessRescueExpert.co.uk revealed that they are being helped by the Department of Business, Energy and Industrial Strategy (BEIS) who are objecting to companies with bounce back loans from being struck off the Companies House register. 

And the final piece of the enforcement jigsaw is still to come with the introduction of The Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill which is proceeding through parliament at the moment and expected to become law before the end of the year. 

Amongst the new powers it will grant The Insolvency Service retrospective powers to investigate the directors of companies that have been struck off to examine the circumstances of the dissolution.  

Because the powers are retrospective, they can go back two or three years after the fact and are not limited to bounce back loans but other debts too. 

Any director targeted under the new law could reasonably expect sanctions including fines, disqualification of up to 15 years and potentially being made personally liable for repaying any illegally obtained debts and costs incurred. 

With the remaining government support measures being withdrawn at the end of September and creditors actions such as statutory demands and winding up petitions being allowed to be issued once again, businesses with outstanding bounce back loans and other debts including VAT arrears or unpaid rent or business rates will be understandably worried. 

Instead of wondering when and where the first creditors’ blow will land, directors and business owners can use this time to draw up their own counter strategies starting with some professional insolvency advice

During a free initial consultation, we will better understand the situation facing a business and give our honest appraisal of the options available, depending on what they would like to do. 

Some businesses might want or be able to restructure their debts and eventually trade their way back to profitability with creditors help and forbearance through a company voluntary arrangement (CVA)

An alternative option might be a company voluntary liquidation (CVL)  if there is no realistic path to recovery.  

This will allow the orderly closure of a business even if it has bounce back loan debt and other outstanding arrears that it can’t reasonably clear. 

There are choices and chances that can be taken - but only if the directors or business owners act in time to access them and work with us to act on them. 

June 2020 insolvency stats

For England and Wales, the total number of corporate insolvencies for June was 1,207 - up 196 from the 1,011 recorded in May - a rise of 16%.

By way of comparison to the same period 12 months ago - these figures are 63% higher than June 2020 but remain 18% lower than a pre-pandemic June 2019. 
  
The upward trend is the first consecutive monthly rise since October and November 2020. Those figures might have been expected to climb for a third month in a row if it hadn’t been for the third lockdown initiated in December 2020

Although compulsory safety measures such as mask wearing and social distancing have been discontinued since July 19th, the number of Covid-19 cases continues to rise across the country at levels greater in some areas than last Autumn which directly preceded another lockdown. 

With support measures due to be fully withdrawn at the end of September and creditor actions such as statutory demands and winding-up petitions being reintroduced at the same time, insolvency statistics could begin to rise at a faster rate from October onwards.

The 1,207 company insolvencies in England and Wales consisted of 1,116 creditors voluntary liquidations (CVLs); 38 compulsory liquidations; 39 administrations and 14 company voluntary arrangements (CVAs). There were no receivership appointments in June. 

The only category that saw an increase on the previous month are creditor voluntary liquidations which are up by half and while CVAs have remained at the same number, administrations and compulsory liquidations had both fallen. 

CVLs are the only insolvency category that was higher than its pre-pandemic equivalent, at their highest recorded level since March 2019, with the rest down 60% or greater. 

Additionally, there were 77 company insolvencies in Scotland comprising 14 compulsory liquidations, 62 CVLs and one administration which was 67% higher year on year and 13% higher than in June 2019. 

This was the highest number of monthly insolvencies recorded since February 2020. 

Scottish company insolvencies tend to be driven by compulsory liquidations but since the advent of the first Covid-19 lockdown in March 2020, there have been nearly twice as many CVLs as compulsory liquidations - being the most frequent type of insolvency for 13 out of 14 months. 

There were also 11 company insolvencies registered in Northern Ireland - 22% higher than in June 2020 but 62% lower than June 2019. 

This was made up of one compulsory liquidation, nine CVLs and one administration.

The overall total of UK-wide company insolvencies for June 2021 is 1,295, an overall increase of 226 from last month’s collective total.


“Uneconomic to continue trading”

Christina Fitzgerald, Vice President of R3, the insolvency and restructuring trade body said: “The increase in corporate insolvencies between between May and June - to the third highest monthly figure since the pandemic started - has been driven by a rise in Creditors’ Voluntary Liquidations (CVLs).  

“The Government’s decision to delay lifting the final Covid-19 restrictions for another month has clearly been a further blow to the business community and may have been particularly unhelpful for the hospitality and retail sectors, which have been hit hardest by trading restrictions and lockdowns. 

“It may be that this impact has been reflected in June’s statistics as the rise in CVLs, used by directors to voluntarily close a company, suggests that for many directors the delay to the removal of the restrictions may have simply made it uneconomic to continue trading. 

“However, we are heartened by the Business Secretary’s recent comments on HMRC’s planned approach to working with distressed businesses. In particular, the news that HMRC will take a supportive approach to rescue proposals from viable businesses is welcome, and we hope will support the profession’s efforts to support Covid-19 hit firms. 


Summer is usually the time when people are looking at holidays and taking it easy so businesses will either be enjoying their slowest or busiest periods of the year depending on their location or industry. 

This year has once again proved that normal service is a long way from being resumed.

The one thing we can say with absolute certainty is that the specialist advice is as good an investment of time right now as anything. 

Whether it’s looking at making slight corrections to make a company more efficient and streamlined when demand picks up after the heatwave and home holidays dissipate, or looking at bigger restructuring or more drastic but necessary action - expert guidance is available here and now. 

We offer a free initial consultation where we can learn more about your immediate challenges and provide you with a range of effective and efficient options that can be implemented  to help any business get back on the right track. 

UK Parliament

Collectively, the pubs, hotels, restaurants and nightclubs of the UK have endured possibly the hardest 18 months they will ever experience.  

Many haven’t opened their doors at all, have had to furlough staff and rely on other government backed support such as bounce back loans or CBILS borrowing and grants.

This has led to over £10 billion of collective pandemic debt being built up by these businesses. 

Now, as the government prepares to hand over responsibility on Covid protection measures to these individual businesses, representatives of the hospitality, retail and property sectors have asked MPs for further additional, targeted support measures based on their experiences. 


Are nightclubs facing a knife edge?


Their wish list includes:

Members of the Business Select Committee heard from representatives of the various sectors this week to gain a fuller picture of the reality facing reopening businesses.

The British Property Federation put forward evidence that 25% of commercial landlords and tenants had yet to reach an agreement on repaying an estimated £6.5 billion in unpaid rent.

They warned that if no solution is found by the end of March 2022, when the moratorium on evictions for commercial tenants ends, then there could be widespread legal action and subsequent consequences for businesses that are delinquent. 

The committee acknowledged that the government was planning on introducing some binding arbitration rules regarding outstanding rent soon but no further details have been announced. 


Kate Nicholls of UKHospitality urged parliament to take action before they break up for the summer next week. 

She said her members, made up of restaurants and hotels, were under increasing pressure as business rates relief and their contribution to staff furlough payments had begun to increase since the beginning of July. 

According to their figures, UK hospitality businesses took out a collective £6 billion in government backed loans including bounce back loans, had over £1.5 billion built up in tax arrears and other private debts and had incurred over £2 billion in rent arrears built up during the pandemic and subsequent lockdown. 

She said: “We’ve managed to keep bankruptcies and business failures to a relatively low level but I think we’ll see that picking up.”


Nightclubs in particular were keen to get clearer guidance on what their responsibilities will be for customer safety if they go ahead and reopen next week. 

Michael Kill of the Night Time Industries Association told the committee: “There is a lot of confusion. 

“The narrative seems to be that using the NHS Covid Pass will not be mandatory but if cases rise and the virus is not being controlled in certain spaces then they may well mandate it which could cause problems for our members.”

According to the latest guidance issued, “higher risk settings' ' such as nightclubs will be encouraged to use the pass as a condition of entry. 

While wearing face masks will no longer be mandatory the guidelines say they “expect and recommend that people wear face coverings in crowded areas such as public transport.”

They should also “meet outdoors where possible and let fresh air into homes and other enclosed spaces.” 

Businesses will be pressured to implement these measures by means of a legal duty on employers to manage risks for people affected by their business including the risk of Covid-19 infection. 

70% of nightclubs surveyed by NTIA said they didn’t plan to monitor customers’ vaccine status on entry although they would obviously consider doing more if the government mandated certification in certain venues. 

A Nightclub owner outlined the dilemma in testimony. He said: “We are looking at how to open as safely as possible. We could ask people to use the NHS app but our research shows that people don’t want to.

“If we do an event and 300 people then have to take 10 days out of their lives (isolating), having come into contact with someone with Covid and some then can’t work after that - are they going to come back?”


With the Covid-19 situation ongoing and rules being written then revised on a regular basis, businesses are desperate for some certainty and guidance. 

Sadly, the only certainty we can see at the moment is the closing window of opportunity for companies to take action to give themselves the best chance of surviving into the Autumn and beyond.  

The reintroduction of wrongful trading and winding up petitions at the end of September along with increasingly aggressive recovery action from lenders for outstanding bounce back loans means businesses only have ten weeks left to put their plans into action while the conditions are still relatively benign. 

As time ticks on, the rules and playing field are changing and soon it might be too late to act.

We offer a free, initial consultation for any business owner or director who wants to put their survival strategy to the test. 

Once we get a fuller picture of your individual situation, we’ll be able to advise on the best course of action you can take to restructure and rescue your business or explore alternative options that might be more beneficial in the long run. 

School closed

Of course they operate in their own sector but they have to pay bills, employ staff and provide a valuable service and make a profit to reinvest in growth and development - just like any other company. 

But they face a range of unique challenges and constraints too. 

Their safeguarding measures will be more stringent than most companies and they will be under closer scrutiny too due to the nature of their existence - keeping children safe, educated and happy. 

Not that the challenges of the last 18 month have been anything but normal for institutions, students and staff alike.

Classroom bubbles, home or halls of residence quarantines and entire terms spent moving in-class learning to online platforms for remote learning.

Taking remote learning as an example - schools and colleges have had to make sure that enough students (and staff) have the actual technology to be able to deliver and receive tuition. 

This can mean purchasing laptops and tablets, along with necessary software licenses if applicable.

Any establishment that offers accommodation will have seen this income stream vanish along with those that hire their facilities out to other businesses and local communities for sport, productions and corporate events. 

With the ongoing disruption to international travel and Brexit restrictions means any business relying on foreign students would have seen severe disruption to this model - as does the idea of remote learning for establishments whose whole business model is based on in-person tuition or residence. 

In 2019, Hadlow College and West Kent and Ashford College became the first in the UK to go into educational administration costing the Department of Education some £26.6 million to keep them operating while a permanent solution to their educational provision was found. 

When the total support for all colleges in England receiving financial aid was factored in then the total rose to over £40 million. 

This includes the provision of £14.4 million in emergency funding to five unnamed colleges in “serious financial difficulty” that received payments in order to prevent them from also entering educational administration. 

Significantly the Education and Skills Funding Agency (ESFA) which provided the payment, recognised that the cost and effort of handling colleges in education administration means “it may need to limit the number of colleges in the insolvency regime at any one time,” depending on each case. 

The Department for Education said protecting students is “the overriding priority for colleges that have entered education administration” and the most significant costs from the two insolvency cases were related to “supporting the operation of the colleges while they were in administration and in facilitating a long-term solution by enabling the transfer of the provision to other local providers.”

Some money will be recouped from the sale of campus assets which are no longer required for educational provision such as buildings and land but not every college has assets that can be sold to support them. 

The National Audit Office also revealed that the government was intervening in nearly half of all open colleges and had spent over £700 million on bailing out and restructuring colleges in the previous 12 months up to September 2020. 

The figures for the following year might end up being even worse.


Can I still be chased for bounce back loan repayment if I close down my business?


When it comes to borrowing under the bounce back loan scheme, our own investigations have revealed that businesses operating in the education sector obtained over 31,000 loans totalling some £726 million overall - an average total of £23,238 per loan made.

We also calculated that according to official estimates between £109m to £436m could be expected to be written off from repayment. 

In an effort to keep the number of education administrations from rising, the government has proposed giving the Education Secretary the ability to force college mergers instead. 

The Skill and Post-16 Education Bill currently before the House of Lords, proposes to “extend the existing intervention powers, enabling the Secretary of State to: exercise their statutory intervention powers in circumstances where there has been a failure by a college to adequately meet local needs and direct structural changes (such as mergers) where use of the powers has been triggered under any of the thresholds in the legislation.”

The Bill says it will give “power for the Secretary of State to amend legislation to expressly provide for Company Voluntary Arrangements to be available in education administration”. 

With the numbers of colleges and schools in financial difficulty rising throughout the country, new powers can help administrators rescue educational establishments should only be welcomed. 

Under the current rules, An educational administrator can be appointed by the Secretary of State to take over an insolvent college.  

They will have a wider remit than in a standard administration as their job will be to protect courses for learners alongside their statutory duty to secure the best outcome for creditors.  

Other industries such as energy, railways and housing associations also have special administration regimes in place to protect vital public services if the provider supplying them runs out of money.  

If students have already begun their courses when a college goes into administration or other insolvency proceedings then they will look for another institution to take over the course provision alongside their insolvency duties. 

Administration might be the best solution for an indebted education business if new buyers are happy to take on the existing debt and provide new investment, energy and ideas into the institution.  

They will have their own plan on how to return to profitability and will be encouraged to do so if at all viable. 

Similarly, if the business can otherwise make a profit but is burdened with seemingly insurmountable debt or has been temporarily affected by Covid-19 but is otherwise fundamentally sound, then a company voluntary arrangement or CVA might be suitable. 

In return for a proportion of the debt being written off, they will repay the remainder in regular monthly instalments, usually for five years, until it’s cleared. All the while continuing to trade, provide a service and gain customers.  

Even though the Department of Education would prefer private schools and universities to be saved in one form or another, sometimes the financial reality means that closing down the business and liquidating the company is really the only option on the table. 

This will allow the institution to be closed in an orderly and efficient way with all assets being sold to benefit creditors.

Another advantage for an education based business to consider liquidation is that it will be conducted and managed by a licensed insolvency practitioner. 

In a creditors voluntary liquidation (CVL), their role is to oversee the valuation and sale of assets at a fair price to repay creditors as far as possible. Crucially, they will also handle all creditors claims which could be useful if they include staff, students or parents. 

Any liquidation process needs to be handled carefully as the business has to cease trading immediately and close in an orderly fashion but one involving children or older students worried about their future paths needs special care and attention given to both the procedure and the ongoing communication with creditors. 

Liquidations can also include bounce back loan debt or CBILS lending too but an insolvency professional will be able to advise more specifically. 

Every industry has had challenges to overcome during the year of lockdowns

Some have been common to every business, some have been unique to the industry in question and education is no exception. 

The experience of being a student has changed, possibly irrevocably, and this will have short and long term consequences - some temporary, some permanent and others that can’t be predicted yet. 

The landscape has changed - probably for good and it provides every business in the education sector with new problems - but also solutions too.

No matter what your situation - one of the best moves you could make right now is to get in touch with us.

We offer governors, directors and business owners a free initial consultation where we can discuss your business in detail and help you plan your next steps - efficiently and effectively. 

Now colleges and schools are being treated like any other business when it comes to insolvency, they can also use the advantages of the protections that some insolvency processes bring too - but only if they act while they have the time to do so.

Being taught a lesson is one thing, learning from one is always better. 

takeaway restaurant

When the Prime Minister announced that the full lifting of lockdown would be delayed a further four weeks until July 21st, the hopes of hundreds of thousands of restaurants, pubs, nightclubs, takeaways, bistros and many more firms are, once again, hanging by a thread.

The Night Time Industries Association (NTIA) conducted a flash survey of 300 of their member businesses this week in anticipation of disappointing news and found that one in four said that they would not last more than a month without further assistance if restrictions were extended. 

Half of respondents said they would have to close permanently if the restrictions went on for longer than that. 54% had already spent over £15,000 in preparation for reopening on June 21st while a small but significant minority, 17.8% had spent over £40,000.

One in five estimate they’ll lose over £40,000 in revenue every week they are restricted or closed while as many as 58% will lose over £10,000 and over a third - 33% - said they will lose 30% of their workforce with a delay. 

NTIA Chief Executive Michael Kill said: “Distressed industries cannot continue to be held in limbo, as businesses are left to fall, any decision to delay without clarity on when they can open will leave us no other option but to challenge the Government, standing alongside many other industries who have been locked down or restricted from opening for an extreme length of time, through no fault of their own, and at their own cost.”

NTIA is also campaigning for the government to extend the temporary 5% reduced VAT rate on hospitality, which is due to rise to 12.5% at the end of September. 

“These businesses are overburdened with debt, so any decision to delay will make them heavily reliant on the Government to extend financial support and relief, including additional restriction grants, exclusion from furlough contributions, extension of loan repayment holidays for CBILS and bounce back loans as well as business rates and VAT relief for the next 12 months, not forgetting the £2.6 billion in commercial rent debt left unresolved” said Michael Kill. 


Bounce back loans - how much was borrowed where you live?


Pubs and bars are also in the firing line with the British Beer and Pub Association (BBPA) estimating that the delay will cost the industry £400 million collectively.  

BBPA Chief Executive Emma McClarkin said: “Every week the current restrictions stay and uncertainty continues, the likelihood of pubs being lost forever increases. 

“Our pubs require as a minimum an immediate three-month extension to the business rates holiday, the ability to defer loan payments due now and a further extension of VAT support. Grants for businesses particularly affected, such as those pubs who cannot still reopen because of the current restrictions, must now also be put in place. 

The ongoing restrictions combine with the following negative factors to form the following timeline of trouble:-

When you factor in the aggressive approach lenders are beginning to take to recover unpaid bounce back loan and CBILS debts, some with personal guarantees attached for directors, then it looks like it could be a cruel summer for these business owners. 

Dr Roger Barker, Director of Policy with the Institute of Directors likened the evolving situation as a “cliff edge” stating that any public health measures must be matched with economic ones. 

He said: “Clearly this is a blow for many businesses but particularly those in the retail and hospitality sectors. 

“As government support for business ends or begins to taper off, it’s vital that other support is pushed out commensurately with the lockdown extension.”

His fears are shared by other groups including the Federation of Small Businesses (FSB), UKHospitality and the British Chambers of Commerce. 

Craig Beaumont of the FSB said: “Businesses in the night time economy have had five quarters of no revenue whatsoever and for everyone else, the chopping and changing makes it impossible to plan and mitigate against the difficulties of restricted trade.”

He also added that the ability to defer VAT is also due to end in June and that “a third of those who deferred their VAT have yet to agree to a repayment plan.”

The British Chambers of Commerce are calling on the government to provide further cash grants at least equivalent to levels provided during the first lockdown and to delay the tapering of furlough payments.

UKHospitality, who estimate their members would collectively lose £3 billion in sales from a one-month delay are lobbying for business rates payments to be postponed until October and for hospitality businesses to receive a rent and debt moratorium until a longer term solution to Covid arrears is found.

The Scottish government has allocated a combined £25 million in the funds for cultural organisations, venues and performing arts organisations to apply to help “prevent insolvency or significant job losses due to the ongoing impact of the Covid-19 pandemic”. 

But any business looking for additional support from the Chancellor will be disappointed as the Treasury confirmed that no additional support will be forthcoming to cover the next four weeks. 

A spokesperson for the Treasury said: “The furlough scheme is in place until September - we deliberately went long with our support to provide certainty to people and businesses over the summer.

“The number of people on the furlough scheme has already fallen to the lowest level this year, with more than 1 million coming off the scheme in March and April.”

Chris Horner, insolvency director with Business Rescue Expert, thinks that while the news is disappointing for thousands of businesses, now the decision is made they can begin to act with more certainty to secure their futures. 

He said: “Even businesses that could fully reopen on July 19th, might not be in a viable position to resume trading with another four weeks of debts building up on top of the previous 16 month’s worth. 

“Businesses that gambled on a June 19th reopening will be counting the cost of purchasing supplies and bringing staff back in expectation but now have an additional four weeks to wait. 

“The confirmation that winding up petitions and the ban on commercial evictions will both resume on July 1st will also be a blow to many businesses as now action can be taken by creditors to begin to recover outstanding debts. 

“Directors and business owners should use this short time before the end of the month to get some professional advice so they can put into place business rescue strategies ahead of these changes taking effect. 

Insolvency moratoriums, administrations and company voluntary arrangements all allow a business to begin the restructuring process with protection from creditors seeking repayment - this could be a crucial first step to saving an otherwise viable business.

“Alternatively, liquidation could be the best solution if debt, including bounce back loans or CBILS loans, is just too high a barrier for the firm to overcome.

“Whatever is the best solution for them - they need to act on it and fast.” 


For businesses that need to reopen but can’t - time is running out. 

The announcements confirming the extension of the lockdown restrictions coupled with the relaxation of some of the legal protections for businesses means the next two weeks are when critical decisions must be taken for companies in financial distress.

Some might have a pathway back to profitability after a temporary period of restructuring, others might have no option but to close down but they can do it efficiently and solve their outstanding debt issues before being able to reform and begin trading freely as a new company once restrictions allow them to. 

The only way they can do this is if they act quickly and get in touch with us to arrange a free initial consultation with an expert advisor. 

They will accurately summarise the options available to them, what they need to do to take advantage and how they can begin to solve their outstanding issues in time to return in Autumn leaner and stronger.

The alternative is the bleak scenarios forecast for businesses since the lockdowns began coming true - and soon.

bounce back loan borrowing
When we published the first part of our series looking at the UK’s bounce back loan scheme earlier this month, it was to get a better view of the overall borrowing levels.

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 six and 23 Wembley Stadiums from new. 

In the second part, we broke down the borrowing by industrial sector - comparing how much retail, hospitality, construction and all the other sectors had borrowed under the bounce back loan scheme.

For this final article in the series - we’re looking on a more local basis. 

Which nations and regions saw the most demand for bounce back loans? Which areas had the most borrowing per capita and which parliamentary constituencies had the highest bounce back loan borrowing rates?


Click here to use our exclusive interactive tool to see how businesses in your local parliamentary constituency have used recovery loans


Our methodology

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 UK regional and parliamentary constituency lending breakdowns were compiled and published by the British Business Bank

The number of businesses in each region was taken from the Department of Business, Energy and Industrial Strategy’s business population estimates. 

Using this public data as our benchmark, we projected three different scenarios for bounce back loan scheme defaults as outlined within them.

The scenarios set out a best case (with a 15% bounce back loan default rate); a median case (40% default rate) and a worst case scenario (60% default rate).

Finally, the regional classifications used are the official Classification Of Workplace Zones (COWZ) administered by the Office of National Statistics


Can a business consider liquidation if it has outstanding bounce back loans?


North East businesses most likely to borrow bounce back loans - but obtain the least money from them

regional bounce back loans

Source: https://www.british-business-bank.co.uk/coronavirus-loan-schemes-continue-to-support-businesses-evenly-across-the-uk-new-analysis-shows/ 

When talking about millions and billions of pounds, It can be easy to lose sight of what these figures mean for individual businesses. 

Taking out a bounce back loan might have been the difference between closing down and remaining open at the time for many of the small and medium-sized businesses that are ultimately the bedrock of the UK economy. 

We’ve collated the total amount each devolved nation and English region has collectively borrowed under the bounce back loan scheme as well as the overall number of bounce back loans taken out by businesses based in that area. 

We also list the average amount borrowed by these companies individually, the ratio of businesses to loans in that area and the projections for default rates, based on our analysis:

While bounce back loans were supplied by banks and other lending institutions, because the funding was guaranteed, the amount lent was limited to between a minimum of £2,000 to a maximum of whichever was lower - £50,000 or 25% of the applicant’s 2019 turnover.

As might be expected then, the areas with both the highest number of bounce back loans taken out and the highest total amount of borrowing were London, closely followed by the South East of England. 

But if we look at the ratio of local borrowing - which is the total number of BBLS loans approved for that location divided by the total number of businesses operating in an area - then the picture changes.

For instance, 27.5% of businesses in the North East, over one in four, applied for finance under the bounce back loan scheme, which was the highest demand in the country. But the average amount actually loaned per applicant was £26,751 - the lowest figure in the UK.

That’s nearly £7,000 less than a comparable London-based business that borrowed an average BBLS amount of £33,480, the highest average amount in the country.     

27% of North West businesses applied for support funding, which were given £29,568 on average (nearly £3,000 more than their North East counterparts) while Welsh companies were the next most eager. 26.4% of businesses based in Wales took out bounce back loan borrowing to an average sum of £27,226 each.

Businesses in South West England had the lowest overall borrowing ratio with just over one in five (20.6%) applying to the scheme and taking £28,432 in bounce back loan lending support.

Businesses on the other side of the Irish Sea from the UK mainland in Northern Ireland saw the lowest overall number of bounce back loans taken out with just over 38,000 approved - nearly eight times less than the amount applied for by London based companies. 

Northern Ireland also saw the least amount of total borrowing too with £1.1 billion lent, although even this total could be subject to defaults in the range of £165 to £660 million depending on the ultimate level of defaults occurring.


Click here to use our exclusive interactive tool to see how businesses in your local parliamentary constituency have used recovery loans


Every MP has constituents who’ve taken out bounce back loans

bounce back loan not London

We’ve taken a deeper dive into the available data and analysed bounce back loan scheme lending according to the makeup of each of the UK’s 650 parliamentary constituencies. 

Regional and national data gives us a good understanding but we can see how the story looks even closer to the ground with this additional information.

The table below shows the top five constituencies for the total number of bounce back loans taken out by companies physically located in the area.

It also shows the total amount they borrowed, the average amount borrowed by businesses located there, the projected default rates and who the sitting MP is. 

This is who businesses might be contacting in future for help if their fortunes take a turn for the worse in the intervening weeks and months. 

Once again, London based companies dominate these results


 

Bounce back loan borrowing by parliamentary constituency

Source - https://www.british-business-bank.co.uk/wp-content/uploads/2021/01/CBILS-BBLS-Offered-Constituency-Region-Sector-11th-January-20215.pdf 

The City of London and Westminster constituency includes some of the most prominent and pricy real estate in the world including Pimlico, Hyde Park and most of Covent Garden. 

Businesses here dominate both the number of bounce back loans taken out (16,122) and the highest aggregate amount borrowed under BBLS at well over half a billion pounds (£633,881,829).

Some of the other areas in the top five might be more surprising. 

The neighbouring constituency to Westminster is Holborn and St Pancras, represented by Labour leader Sir Keir Starmer. This has the second-highest number of businesses taking out bounce back loans, borrowing a total of over £354 million, of which at least £53 million could be lost if just 15% of these borrowers default in the coming months. 

Hackney South and Shoreditch, most commonly associated with technology startups and the hipster coffee hangouts, were the next most eager to borrow with over 9,000 bounce back loans obtained, which provided over £300 million in support collectively for the app builders and small artisan brewers in this quarter of the city. 

The top five constituencies outside of London represent some of the other city centre areas of Birmingham, Manchester, Glasgow and Liverpool, along with a more surprising entry - Slough. 

Most famous as a commuter town at the southern edge of the Thames Valley and the fictional headquarters of Wernham Hogg paper as seen in the titles of The Office, Slough is also one of the largest mixed commercial estates in Europe combining a number of large manufacturers and corporate headquarters which will attract other companies wanting to be located closer.


Click here to use our exclusive interactive tool to see how businesses in your local parliamentary constituency have used recovery loans


Bounce back loan borrowing by parliamentary constituency (excluding London)

Source - https://www.british-business-bank.co.uk/wp-content/uploads/2021/01/CBILS-BBLS-Offered-Constituency-Region-Sector-11th-January-20215.pdf 

bounce back loan by constituency

Chris Horner, Insolvency Director with Business Rescue Expert, said: “The data gives a fascinating insight into the distribution of bounce back loan borrowing across the whole of the country.

“It’s especially interesting when you look at which areas have seen the most businesses borrowing and the amounts they have loaned.

“Based on the insolvency cases of the small businesses we’ve worked with this year, over 41% of them entered liquidation with an outstanding bounce back loan balance of £37,350 - higher than the individual borrowing averages of any location. 

“No matter where a business is based, the important thing for them to remember is that they do 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. 

“After nearly two years of consistent decline, company insolvency figures are starting to rise once more and as support measures are removed later in the year, we’d only expect this trend to gather pace. 

“It won’t happen at a uniform rate across the country, it will affect some areas more quickly and deeply than others.

“That’s why finding out more administration procedures and liquidation options now before circumstances force them to, could be the best call any business could make in 2021.”

takeaway restaurant

Social distancing rules will still apply and it will be limited to table service only but for businesses with no outdoor space or that have been relying on delivery orders alone, it’s set to be a red letter day for a lot of the hospitality industry.

Hotels, hostels and B&Bs are also able to open to the public rather than offering self-contained accommodation. 

The lifting of restrictions means that a maximum of six people from two households can meet in a group indoors with further restrictions set to be lifted in June. 

Kate Nicholls, chief executive of UKHospitality, said: “There is a huge sense of relief within the sector, in particular for the six in 10 venues that weren’t able to reopen due to a lack of outdoor space.

“However, with significant restrictions still in place, this is a psychological opening rather than an economic one, with the profitability of the sector still a huge issue.

“Hospitality, as it emerges from restrictions, is still in a fragile state and continued government support will be critical to ensuring the sector is rejuvenated and plays a full role in the wider economic recovery.”


A Business Viability Review is a far better option than a guess


While a number of takeaways, be they fish and chip shops, kebab and pizza makers or make the best jerk chicken outside of the USA and the caribbean, have been operating during lockdown, many haven’t been able to reopen. 

Some takeaways have been able to provide a click and collect, drive through or delivery services and won’t see a big change next week as they will be able to continue offering these. 

Food providers with an indoor dining facility will be able to reopen this for the first time in months but will have to follow some careful steps to make sure they remain safe and Covid-compliant when they do. 

Others might be reopening for the first time since the year of lockdowns began in March 2020, so will have a lot more to do and think about. 

Including whether it’s worth reopening at all. 


Doing the reopening shuffle

A brief itinerary for reopening a takeaway or restaurant will look something like this:-

 
None of this takes into the financial position of the business itself and how this has been impacted in the previous 12 months.

If the restaurant has been able to offer a take away or home delivery service then it will have been able to bring some money into the business as well as possibly taking advantage of government backed support measures such as the bounce back loan scheme or the coronavirus job retention scheme or furlough. 

For those that weren’t then things could be a lot more serious and bleaker. 

Debts will have continued to accrue, bills would have been paid all the while there’s no income arriving to offset it. Even if they accessed support measures, bounce back loan repayments are beginning to come due unless these have been deferred by six months.

The unfortunate but inevitable truth might be that some takeaways just can’t afford to reopen and instead should look at closing their business down properly so they can begin again.

This also applies to shawarmis, pizzerias and chippy’s that might still be trading but realistically have no way of clearing their debt and at best are just keeping their heads above water. 

Some might just need some breathing space to work out if the business could be viable again and produce a plan to achieve this

For others it would involve liquidation but depending on individual circumstances this could be easier, quicker and cheaper than they thought.

Before any decision is made the best thing to do is to get in touch with us. 

We offer a free, initial consultation where we can get the full breakdown of the circumstances surrounding the business.

Then we can tell you what you can do, right now, that will have an immediate impact and what choices can follow from that. 

Only then can you look forward to the future with some certainty and be able to plan far ahead of what’s for tea tonight. 

2020 Year of Lockdowns

It’s nearly been 365 days since the UK went into its first national lockdown as it faced its first major public pandemic in over 100 years.

From March 23rd 2020, companies in every sector closed by order and we all had to work, educate and shop from home to contain the spread of Covid-19.

Nothing has really been the same since - especially for businesses.   

We’ve spent the past 12 months helping firms that have fallen into financial difficulties to restructure and pay off their debts under new arrangements or allow them to efficiently close so their owners can move onto new challenges when the lockdown is gradually lifted completely. 

Alongside our business rescue and recovery work, we’ve also spent a year observing, collating and analysing data from various sources to compile a comprehensive and wide-ranging report of what happened to our country and its companies.

The “Year of Lockdowns” story shows what effect restrictions have had on the various industrial sectors, geographic regions and on the individual businesses and employees that make them up.  

This is the story of 2020 - a "Year of Lockdowns”. 


COVID-19 caused more economic damage to the UK than Napoleon, Hitler and The Kaiser 

Napoleon
In an already historic year, we should start with the news about history being made.  

The Office of National Statistics reported that 2020 saw UK official GDP shrink by 9.9% in the previous 12 months - the largest annual fall in over 300 years since the Great Frost of 1709. 

The collapse is even greater than any previously recorded including during the Napoleonic wars; World Wars One and Two; the great depression of the 1920s and the great recession of the late 2000s.  

The economy regained some ground in the second half of the year as some lockdowns were eased and the “Eat Out to Help Out” scheme attracted more people to support their local pubs and restaurants.

Despite these positive factors, the economy was still 6.3% smaller than it was in February, the last full trading month before the first lockdown was implemented. 

This was the biggest fall among all the G7 nations with USA GDP down 3.5%; Germany down 5% and Japan down 5.6% by comparison.


One in three UK workers were furloughed as unemployment rose to a six year high

Furloughed

Since the beginning of the lockdown and the Coronavirus Job Retention Scheme (CJRS) being rolled out, 11.2 million workers have been furloughed in the previous 12 months. 

With 32.6 million people employed in the UK, this means that one in three workers was in receipt of furlough pay at some point in 2020. 

The UK unemployment rate also rose by 1.1% to 5.1% by the end of 2020 with 1,744,000 additional people looking for work. This is the highest recorded level since 2015. 

Chancellor Rishi Sunak extended the furlough scheme until the end of September 2021 in the recent budget with employers expected to contribute 10% of furloughed employees wages from July, rising to 20% for August and September.  

The Office for Budget Responsibility (OBR) estimates that £73.6 billion had already been spent on employment support schemes such as CJRS and others by November 2020 so this will add to this already striking figure. 

While economic and employment activity are expected to rise, greatly, in the next six months as lockdown is gradually lifted, the end of the furlough and other schemes will still create a moment of hazard for businesses and their employees if they can’t find a way to begin to trade profitably by then. 


Construction bore the brunt of insolvencies by industrial sector

Scaffolding

The Insolvency Service reported that since March 2020 there were 8,205 company insolvencies up to and including the end of January 2021. 

Broken down by individual industrial sector they were :

The halting of various building projects, both large and small scale, have badly damaged the construction industry over the previous 12 months. 

This might seem surprising given the historic damage experienced by the hospitality and retail industries but these have been well publicised and several were more visible to the public as an empty shop unit will be more noticeable than an empty building site.

There was also £453.4 million in redundancy pay and other support benefits paid out in 2020 which was the highest amount in ten years and an increase of 31% from 2019.

Another government agency, the Redundancy Payments Service, will make financial payments to employees whose former employers have gone into insolvency and cannot pay any legally due claims. 


Yorkshire and Humber businesses were most likely to become insolvent in 2020

Whitby
With the help of the Office of National Statistics and The Insolvency Service, we looked deeper into the regional insolvency statistics for 2020 and produced a comparative figure - the Corporate Insolvency Ratio - showing the likelihood of insolvency based on the numbers of active businesses in a region/nation and the number of business insolvencies recorded there. 

The table shows the number of businesses registered in each UK nation and English region, the total number of business insolvencies and the Corporate Insolvency Ratio for each.

[ninja_tables id="12447"]

Because of certain statistical caveats, the figures are an approximation based on available data rather than a complete and official record. 

On this matrix, the figures show that a business in the Yorkshire and Humber region of England was statistically most likely to undergo an insolvency event than in any other region (1 in 115) while a company based in Northern Ireland would be least likely (1 in 506). 

Additionally, businesses in the North East, North West and West Midlands of England along with London were at greater risk compared to the national average (1 in 207) while Scotland, Wales and every other English region was less likely than the average. 


Why corporate insolvencies went down in 2020

high street

Given all the news and information we already know about the year of lockdowns, it might be surprising to learn that the total number of corporate insolvencies actually fell in 2020. 

They went down to their lowest recorded levels since 2007. 

So what’s going on? The main reasons can be surmised as follows:-

With the exception of the insolvency moratorium, all of these measures are temporary and will be withdrawn by Autumn this year. 

Ironically, 2021 could have many more corporate insolvencies than 2020 had. 

Chris Horner, Insolvency Director with Business Rescue Expert said: “Ominously, even with restrictions being lifted and economic activity rising, 2021 will be a worse year for insolvencies in several industries than the year of lockdowns was, 

“Government support in the form of backed loans, furloughs and the temporary ban on winding-up petitions and other creditors actions are all expected to end sometime in 2021. 

“Bounce Back Loan repayments and others will begin to come due, businesses will have to decide if they can re employ or redeploy their furloughed workers and creditors that have been under severe financial pressure themselves will finally have the ability to look for repayments that might be critical to their own survival.”


Not on the High Street - Anymore

Topshop

The previous 12 months has seen the demise of some of the most storied companies in Britain. 

Debenhams was formally wound-up in the High Court with BooHoo buying its online brands and trademarks to relaunch as an online-only retailer. 

The Topshop, Topman and Miss Selfridge brands of the Arcadia group were bought by ASOS with BooHoo returning to purchase the remaining Wallis, Burton and Dorothy Perkins brands. 

No physical properties were included in any of the deals. 

BrightHouse, the UK’s largest rent-to-own retailer went into administration in April along with Laura Ashley while fitness retailer DW Sports announced it would not reopen in August. 

Regional UK airline FlyBe went into administration in March where it remains until a buyer is found. With other carriers unable to operate a regular, reliable UK-wide service yet, 2021 is another year that might have historical consequences.

Research from the Local Data Company shows how devastating the year of lockdowns was for the retail industry. 

They estimated that 17,532 chain store outlets located in high streets, retail parks and shopping centres closed last year - an average of 48 per day. This is compared to an overall total of 7,655 openings to replace them, or 21 per day.   

The net loss of nearly 3,500 locations was a third higher than in 2019. 

“The rise of online shopping and home delivery which provided a shot in the arm for the hospitality industry, might be a more mixed blessing for retail” said Chris Horner, Business Rescue Expert’s Insolvency Director. 

“We won’t know for some time how many new habits and shopping methods we adopted in 2020 will stick in 2021 and become permanent or how many will revert to the previous physical model. 

“Some companies might bet big one way or another and hope to reap the benefits of being a successful early mover. Others might hedge their bets and hold back investing, redeployment and retraining which could prove more sensible in the medium and long term but would impact negatively in the immediate future in terms of investment and activity.” 


We still don’t know how 2021 will unfold as many businesses are still unable to open their doors and trade freely and some won’t until we get into the Summer at the earliest. 

For others, even when they do return, they’ll find that customer behaviour, retail trends and other changes will mean that they will have to recalibrate their own offerings if they want to make up lost ground. 

One thing we can guarantee this year, maybe the only thing that can be, is that Business Rescue Expert will continue to be here to help advise and guide any business that is having financial issues or doesn’t know what their next professional step should be. 

We offer free virtual consultations for any company that needs to clarify its position and understand what options are open to it. 

The benefit of acting first is that you usually find you have more choices and strategies available than whoever acts second. 

Get in touch and find out what they are for your business - today.

Nightclub
Britain’s nightclubs, bars and casinos are due to reopen from June 21st at the earliest with most being closed for nearly 12 months since the start of the first national lockdown in March 2020. 

But the Night Time Industries Association (NITA) say that even if this happens, the sector is still facing an existential threat to its very existence. 

A recent survey of more than 100 of their members reported that 81% say they won’t survive beyond the end of March without further support from the Government.   

Additionally, 86% of respondents have had to make redundancies this year with 65% making more than half of their entire workforce redundant before the end of 2020. This is before taking into account that 43% of respondents had not received any grant support from the government during this period.  

While lots of industries are pleading their case to the Chancellor for special treatment and support, the night time industry feels its case is first among equals for consideration. 

NITA Chief Executive Michael Kill outlined the various threats his members are facing on multiple fronts. 

He said: “Throughout this pandemic and the restrictive measures levied against the sector, it’s clear that our businesses are being systematically eradicated from society.

“They continue to be excluded from the narrative of press announcements and planning, and though misconceptions and a misguided understanding of the sector, we’ve been given little or no opportunity to re-engage even with very clear ability to open our spaces safely.”

Kill outlined how current proposed changes in planning reform under permitted development rights was another huge threat to the sector as it had the potential to allow for the demolition and rebuilding of vacant and redundant light industrial buildings used as clubs and venues as housing instead. 

He said: “Given that over 88% of nightclub businesses are over two quarters of rent in arrears, we’re poised for a windfall of landlords at the end of March when the forfeiture moratoria comes to an end. Reclaiming their property and utilising this planning mechanism to convert many of our much loved cultural spaces and social environments into housing. 

“Getting help from banks and financial services, whether through insurance or lending within the sector, has been near impossible, confidence is at new lows coupled with the ineligibility to access much financial provision outside of furlough. 

“The extensive period of closure without recognition is perceived by the sector as negligence.”

A recent All-Party Parliamentary Group report into the Night Time Economy found that it contributed as much as £66 billion to the UK economy but also acknowledged the unique logistical challenges facing an industry that thrives on close human contact as part of the experience. 

While the Group suggested that latest flow testing along with vaccinations could be a key component in the reopening, Luke Laws, operations director of Fabric nightclub in London said that the reality of this would see a socially-distanced queue stretch 1.7 miles from their front door if 2000 people, their capacity, wanted to gain entry. 

This also doesn’t take into account if negative Covid-19 tests were required for entry - where the clubbers would wait for results and who would be responsible for administering and paying for the tests. 

Mr Laws said that they had looked at scenarios such as renting and closing off nearby roads to allow for this but this would be untenable as it would involve at least 240 additional staff just to administer. 

Owners also cite the issue of dancing and compulsory mask wearing as other negative factors affecting their reopening. For instance, having a socially distanced dancefloor would see customer numbers fixed at below break-even points for many operators. 

The industry as a whole will be hoping for targeted specific support coming from the Budget if the majority of clubs and bars are to survive in the long run but with lots of other industries also seeking support - they might have to remain behind the velvet rope for longer. 

Nobody likes calling last orders but it’s an essential task for any operator. 

This also applies if they take a long, hard look at their own business circumstances and likelihood of recovery. 

While there may be some support forthcoming in the Budget, it might be too little, too late if isolated or insufficient. 

The year of lockdown might also have given owners different ideas and impetus about what they want to do going ahead. 

They might have discovered a new direction they want to pursue or a new venture they’d like to try but can’t because they think their previous one will hold them back and weigh them down. 

Have a chat with us first. 

A free initial consultation with one of our expert advisors will allow us to explore options with you including various ways on how to close your business with a minimum of stress and fuss. 

There’s always a weekend every week so if you feel the party’s winding down, let us help you start your next one.

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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