The Twilight Zone was an innovative and groundbreaking TV science fiction and mystery series made in the 1950s and 60s.
It’s been rebooted several times but some of its most famous episodes have been updated and parodied so much that they become part of the general culture.
So much so that the original moral of these stories tends to get washed out and forgotten in the retelling.
One great example of this is the story of “a kind of stopwatch” that was remade as a film called Clockstoppers and as a part of The Simpson’s Treehouse of Horror halloween specials.
Both in the original and in the Simpsons version - a man or Bart and Milhouse acquire a stopwatch with one unusual extra feature - it can be used to stop time itself.
Like previous owners, they misuse the power, it breaks and while they ultimately repair it they remain marooned in time for several years.
The moral is that while it might be nice to stop time, it can’t be done permanently and time eventually moves on and catches up with us.
But what if you could pause time for long enough to give you space to work on ways to improve the financial outlook for your company or that could stop or freeze creditors actions while you arrange advice and assistance so that when they restart, your business would be in a stronger position to engage with them?
An Insolvency Moratorium might be the answer you’ve been looking for.
It allows businesses to have an enclosed legal breathing space away from creditors’ recovery actions like winding up petitions or bailiff visits while a recovery plan is formed.
This will restructure the company's debts and give creditors more chance of ultimately being repaid rather than seeing the company go into liquidation with the increased risk of not receiving repayment.
When first granted, an insolvency moratorium automatically lasts for 20 working days.
This can be subsequently extended for another 20 business days if required with more extensions available for complex cases and only with the consent of creditors themselves.
An insolvency moratorium is different from administration or a creditors voluntary liquidation (CVL) in several ways.
The company directors remain in control of the business and continue to run it on a day to day basis but a monitor is appointed to make sure that all conditions are being adhered to.
Of course the business also has to keep on paying any rent, employment entitlements or any liabilities that come from financial service contracts and the monitor’s fees and expenses - although this is agreed in advance.
What happens when a moratorium ends and time restarts?
Depending on various factors there are several ways an insolvency moratorium can be resolved.
The business raises new funds and investment from shareholders or directors own funds, or it could include a business loan secured with the aim of consolidating existing company debts into manageable payments.
A CVA is arranged with the creditors approval and the business continues trading and making regular monthly payments to creditors in return for being allowed to continue to trade and a proportion of existing debt being wiped.
Preferably after taking professional advice, the directors or business owner reach an informal payment plan with their creditors to begin paying down the debt. Additionally, if tax arrears are owed then a formal Time to Pay arrangement could be reached with HMRC.
Missing repayments for both could have serious consequences so should only be entered into carefully.
Sadly not every business can be saved even with an insolvency moratorium. If the debt and other issues prove to be insurmountable then the moratorium is ended and the business enters administration or liquidation.
“If you knew time as well as I do, you wouldn’t talk about wasting it” - Alice through the looking glass
Rules are changing at the end of September for winding up petitions and several other instruments including the final end of the furlough scheme.
The end of the year is in sight and the remaining weeks and months should be spent trying to regain momentum and build up to the best Christmas trading period for at least two years.
But what if you’re struggling with deciding which repayments to miss or trying to raise enough liquidity to make the minimum costs needed to avoid running up arrears for bounce back loans or other borrowing?
Even before thinking about an insolvency moratorium or other procedure, you should get in touch with us.
We offer a free initial consultation for any director or business owner who needs some impartial, expert advice on what they can do to help get their business back in shape for a hectic end-of-year period.
You could have more options than you think and if you’ve acted quickly, could even start to implement them and see results very soon.
However time will continue to tick by and if you don’t use it wisely then you could still have the same or worse difficulties later but without the time to fix them.
Which not even a magic stopwatch could help you with.
The ones that if solved or removed, would be a launchpad for the success that would likely follow because all the other fundamentals are strong.
It’s a problem video gamers come up against quite often.
They face a seemingly-impossible end of level boss that no matter what strategy they try, they cannot defeat and get past.
Countless hours have been invested and the familiar but rarely sincere “just one more go” has been invoked more than once but the only certainty has been the same negative result.
In the age of Youtube, Twitch, Discord and even gaming performance coaches - there are more ways to find this assistance - amateur and professional - than ever before so they can proceed towards their final goal.
Which brings us back to businesses in the same situation - where’s their solution and video guide to get them past their immediate insurmountable hurdle and help them to literally level up?
The good news is that it’s far easier to find than asking a bigger kid in an arcade to do it for them.
An administrator can be their extra life and give the company the fresh start it’s been reaching for - preserving jobs and giving the business a power up just when it needs it - but it does come with risks.
To clarify, administration is a formal, legal insolvency process that places an external manager - the administrator - temporarily in charge of a business with the aim of turning its fortunes around and saving the company.
This is a serious decision that can have ultimate consequences for a business so should not be entered into lightly or without getting professional advice first to see if it is the most appropriate course of action.
If this is the case then administration is a proven method of helping otherwise viable businesses restructure and regroup before reemerging stronger than before the administrator takes temporary charge.
Another important point to remember is that the administrator represents the interest of the company’s creditors at all times, not the management.
They’re there to make sure creditors can see the best possible return on their expenditure. If that’s through returning the business to profitable trading then they will pursue that option.
If it’s selling the business under a pre-pack arrangement to new management then that will be their chosen course and if the last recourse to secure their money is through liquidating the business and selling the company’s assets off to generate the best return - then they’ll do it.
Once an administrator is officially appointed they will produce a recovery plan which will always be based on repaying as many debts as possible and looking at ways money can be saved in the immediate and short term to reach the goal of saving the company.
They will be aided by an insolvency moratorium applying immediately which halts all creditor actions, giving the administrator time to put their plans together.
Administration is not an open-ended situation that will be allowed to continue permanently.
A creditors meeting must be held within ten weeks of the administration being entered where they will outline their proposals and their recommendations.
Depending on the unique circumstances surrounding the business - its asset portfolio, cash flow and banking situation - they will inform the creditors what the most realistic outcome will be and what the plan is to achieve it.
This may even involve redundancies or other cutbacks in the short term.
Outcomes
An administration can end in several different outcomes depending on the circumstances and future viability:
The moratorium could give the administrator enough time to solve the immediate financial issues through raising extra funds through asset sales, new investment or informal agreements reached with creditors to settle existing debts.
If this happens then it’s mission accomplished - the administrator hands back the business to the directors who will continue to run the company.
Now free of the financial problems that originally burdened the business.
An administration might not be the only insolvency procedure the administrator needs to employ depending on the circumstances.
If the debt is particularly difficult to restructure and is the main obstacle to the business trading profitably in future then they might decide that a company voluntary arrangement (CVA) is the best option to pursue.
Creditors are approached to see if they will accept a regular, monthly payment from the business in return for writing off a proportion of the overall debt.
This will usually be in their interests as they will stand to gain more from the payments than through any other method including asset sales following liquidation.
If agreed, the directors resume control of the business and it resumes trading with the new CVA payment agreement in place.
The business might be made viable once again but it might fare better under new management or owners bringing fresh ideas, energy and investment.
The administrator will market the business for sale immediately and conclude the deal while the business is still protected by the insolvency moratorium.
The existing directors might even be part of the ownership teams depending on circumstances but once the deal is concluded and the new management is in place then the administrator hands back control to this group and exits.
Sadly the debt and problems of the company might be insurmountable for even the best administrator and the only viable way forward will be to close the business down through a creditors voluntary liquidation (CVL) process.
The business is closed down in an orderly fashion and it’s assets and property are sold off with the returns going to pay off creditors in legal order of precedence.
Because the business will already be in administration before the liquidation process begins, most assets will already have been sold prior to this so once a CVL is entered into, the funds can begin to be distributed to creditors.
In the battlefield of giving business owners and directors the chance to fight another day, it’s our call of duty to give them the best advice and support possible.
We don’t claim to have a halo but if you get in touch and arrange a free initial consultation with one of our expert advisors, we’ll let you know which options and strategies would have the best mass effect on your company’s chances of recovery and renewal.
Business life is strange and unpredictable so we’ll help you go through the gears when it comes to implementing any changes you need to. It’s a far cry from leaving you to manage on your own but an essential part of our service.
If it’s time to reboot your approach, do it with a Business Rescue Expert by your side.
Specifically because the repayments from this and other Covid-19 support measures are coming due this year - if they haven’t already - and there is some confusion for businesses looking to close down about how seriously or not this outstanding debt is being treated.
A recent example of the confusion is a letter that the Business Secretary Kwasi Kwarteng sent in a letter to business leaders this week.
In the letter, he said that HMRC would take a “cautious approach” with companies that were trying to reopen post lockdown and pay down their debt appropriately.
Specifically replying to concerns raised by R3, the insolvency trade body and the Institute of Directors that urged HMRC to help businesses in danger of becoming insolvent due to a combination of issues including:
Kwarteng wrote that HMRC would “adopt a cautious approach to enforcement of debt owed to government that will have accrued” and said that HMRC would soon update its enforcement methods so that any outstanding debt could be brought into managed arrangements for businesses affected by the pandemic and subsequent lockdowns.
He said that using insolvency to enforce payment would remain a last resort and that he recognised that “the path back to full trading will be difficult for many companies, particularly those with accrued debt and low cash reserves.”
This is in contrast to news published by The Insolvency Service in the same week highlighting their success in petitioning courts to wind up five limited companies since this year that had been involved in fraudulent activity involving bounce back loans and CBILS borrowing.
Dave Elliott, Chief Investigator at the Insolvency Service said: “The bounce back loan scheme was made available to help support businesses during the pandemic.
“It’s outrageous that some directors have been trying to abuse this support, and the action we have taken shows we take this issue extremely seriously.”
The new Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill, currently before Parliament, will give the Insolvency Service additional powers to investigate and disqualify directors of companies which fraudulently claimed bounce back loans but were then subsequently dissolved.
The investigative power will be retrospective to look at conduct that took place before the law came into place and if wrongdoing or malpractice is found, the sanctions can include a ban of up to 15 years or even criminal prosecution for serious offences uncovered.
Chris Horner, Insolvency Director with Business Rescue Expert, thinks that while it’s useful for HMRC and the Insolvency Service to remind directors and business owners about their responsibilities, the mixed messaging might cause unnecessary confusion.
He said: “From the conversations we’ve been having within the industry and examples we’ve seen it’s apparent that the Insolvency Service are directly targeting abuse of the bounce back loan scheme, CBILS and furlough fraud as their highest priority this summer.
“They will specifically be looking at businesses with bounce back loans who have tried to use the route of dissolution or striking off to close their business down instead of using a more appropriate liquidation procedure.
“In these circumstances it wouldn’t be surprising to see them seeking compensation orders to make directors personally liable for these debts if they have closed their business incorrectly in the eyes of the Insolvency Service.
“Recovery action on defaulted payments will be pursued for at least 12 months as standard and even though lenders will be repaid under government guarantee for bounce back loans for example, they are still required to continue any recovery action.
“They will probably avoid initiating insolvency proceedings just for bounce back loan debt by itself but will continue with debt collection measures including using debt collectors or bailiffs.
“We can also clarify that any personal guarantees given against bounce back loan debt specifically are unenforceable and these debts cannot be sold on to other collectors. They will remain the responsibility of the original lender to collect.
“Another thing bounce back loan borrowers need to remember is that even if they have obtained a payment holiday from their first repayments, interest continues to accrue during the payment holiday.
“If a business with bounce back loan borrowing is contemplating liquidation, which it can do, it will be treated like any other creditor and should not be paid over and above agreed repayment terms.
“This also includes if the funds are being held as cash in their bank account. They should not use this to repay the lender ahead of other creditors as in the event of insolvency it would be treated as a preferential payment.”
If your business has taken out a bounce back loan or CBILS borrowing in the past 18 months and you’re worried about repayments or if you think your best option is to close your company but don’t know how to deal with these specific debts then get in touch with us today.
We offer a free initial consultation for business owners and directors to discuss their situation and we’ll work with them to come up with the most efficient and effective plan to reach their goals.
As it continues to be a challenging environment for companies and will remain so for the rest of the year and possibly beyond, so taking the time to fix any financial difficulties facing your business right now could be the best time investment you make in 2021.
If you’re a business owner or director and you can remember a year of trading conditions like the one we’ve just had then you may be one of the unluckiest people in the country.
Not just the external blows of the pandemic and subsequent lockdowns but also the imposed restrictions and closures, the challenge to access the various support schemes and the struggle to keep the business going in the hope of being able to reopen and recover.
In an ideal world, many companies will be able to reopen in April and resume trading successfully straight out of the gate.
But what if this doesn’t happen?
What if you’ve already cut your expenses back to the bone to try and make it through and now you’ve got the opportunity to trade your way back to profitability - it’s just not happening.
Would you be able to make more changes to finally enjoy a recovery or are you looking at a situation that’s impossible to turn around?
How can you identify insolvency problems and find the right solution for you and your business?
We’ll highlight some key signs to look out for and tackle before the issues simply become too big to tackle and insolvency becomes inevitable.
Ready for reopening? Book a Business Viability Review to make sure you’re at peak performance
These include the issuing of statutory demands and winding up petitions and the suspension of termination clauses and directors’ liability for wrongful trading
The key point to bear in mind is that the suspension is not only temporary but finishes within weeks- on June 30th to be precise.
The good news is that if you begin to take action now to identify and address potential issues then you won’t be caught out when restrictions are lifted and creditors are allowed to take action against companies that owe them money again - because they will and quickly.
Regarding insolvency you might hear a lot of complicated words and formulas but the most important one to remember is also the simplest - a business becomes insolvent if it can’t pay its bills and debts when they’re due. That’s it.
So what should you be looking for to give you advance warning that this is where the business is heading?
Personally and professionally, everybody has bad months. Whether it’s down to poor sales, a lack of tight credit control, supply and stock issues - you need to understand whatever is causing cash flow problems and figure out if they are temporary blips or signs of more ingrained issues.
If the business has an overdraft that it’s never out of or it's exhausted all its available avenues of credit then this is a major sign of impending insolvency. Engaging in “ceiling borrowing” - where you borrow money just to stand still and pay wages or regular bills is one of the most reliable indicators.
Borrowing to pay bills can cause difficulties but not paying bills at all certainly will. Non payment of staff wages is a serious red flag. It’s particularly bad if you aren’t paying staff wages on time and in full because you’re squandering their loyalty and goodwill you’ll need to get through these tough times.
Non payment of bills Not paying external bills creates creditors who, once restrictions are lifted, are able to bring various remedial actions against a company including statutory demands for repayment or even winding up petitions for debts as low as £750.
This is a serious threat that has to be treated as such because the next step from here is a court ordering a compulsory liquidation of the business.
Other signs of potential or impending insolvency problems may be individually benign but collectively potentially harmful including high staff turnover, delays in providing company accounts or other financial information, losing regular customers and contracts and even a general downturn in the sector the business operates in.
There’s courses of action available that you can take relatively quickly if you suspect that you’ve got an insolvency problem.
Firstly you can instigate one of two internal tests to definitively prove if the business is insolvent or not.
The first is the cash flow test. This is where the business looks at whether it has enough liquidity to pay staff, suppliers, rent and any other bills on time and still has surplus to purchase supplies and new stock to continue trading.
The focus should be on the short term as if there are immediate problems then this test will uncover them.
The second is referred to as the balance sheet test and is more complicated.
It involves examining the company balance sheet to provide the most recent value of all the businesses’ assets - stock, cash in bank and at hand, debts owed to it, property, vehicles, machinery and digital assets.
These are then set against all known company debts to all creditors including lenders and HMRC, suppliers, employees or others.
If the company’s assets are more valuable than liabilities then it is technically still solvent. If the opposite situation is true then the business is technically insolvent as selling everything it owns would not be sufficient to clear the owed debts.
If you are in any doubt get in touch with us and talk to us about your options moving forward. An option you might not be aware of, for example, is an insolvency moratorium.
This is where an insolvent business is granted a legal period of respite from creditors and other recovery actions while its directors work out potential restructuring and rescue strategies with the guidance of a licenced insolvency practitioner.
The moratorium is an official “breathing space” that allows businesses to focus on their path out of insolvency, if there is one, or what other alternative options are open to them.
We offer a free initial consultation with any business owner or director to discuss the nature of any problems and together we’ll work on a realistic recovery strategy.
2021 could still be the year you overcome your insolvency problems but only if you take action while you still can.
With homeschooling becoming second nature to a lot of us this year, one of the fun things has been rediscovering some of the classic old stories we used to read when we were kids.
Not just the modern tales like Gruffalo and Zog the Dragon, but some of the older ones like The Boy Who Cried Wolf.
The thing that strikes you most in that story is the amazing forbearance of the townspeople who keep running to his rescue several times before the unfortunate end.
It perfectly illustrates that while there are always opportunities to change course, they are finite and eventually one will be the last chance.
So it is with the announcement that the temporary measures brought in by the Corporate Insolvency and Governance (CIG) Act are being extended once again and are now set to expire on June 30th 2021.
These measures include:-
Chris Horner, Insolvency Director with Business Rescue Expert, thinks this is potentially all good news for company directors and owners of businesses that face an uncertain future.
He said: “A lot of small businesses and larger companies will welcome the fact that these protections and support won’t be disappearing in a couple of weeks.
“Crucially it buys them more time to plan and execute their recovery strategy for when the measures do eventually end - which they will eventually.
“We don’t exactly know how the economy will react and function when the restrictions begin to be lifted and physical stores can reopen again so there could very well be a continued depression of activity after external support is withdrawn.
“Getting professional advice and acting on it - making the key decisions that will be best for your business and staff - now will give those companies a valuable head start in the race to reopen.”
Thinking that how things are right now will always be is an easy mistake to make. We’ve probably all mistaken hope for judgement and been taken by surprise.
The extension of these temporary measures once more is both a gift and a warning.
A gift in giving us time and opportunity to start building a recovery plan beginning with a free initial consultation with one of our experienced advisors.
They will learn what circumstances your business is in and help you understand what your options are to revive and hopefully restore your firm’s strength to where it was before we’d even heard of Covid-19.
The warning reminds us that there are always wolves outside and not acting while you have the chance is all the invitation they’d need.
One of the first things we’re going to do when lockdowns and restrictions are firmly a memory and in the rear view mirror is to go out to the theatre.
It will be great to experience an occasion safely with other people again as, despite Zoom productions and recordings, there’s nothing quite like being in a great live venue.
Especially for productions like Wicked where the cast take to the air and fly out above the audiences heads singing about how they’re defying gravity.
Which brings us nicely to the latest UK Insolvency statistics for February that have just been released by The Insolvency Service.
We’re still in the first quarter of 2021 and the trend begun last month of total company insolvencies falling away after a rise in December continues.
The total number of company insolvencies in February 2021 for England and Wales fell again by 9% to 686.
This was down from January’s total of 754 and is 49% lower than February 2020’s figure of 1,348. It’s also the lowest number of company insolvencies recorded since January 2019.
Given that thousands of businesses are unable to open or trade at the moment, haven’t for months and that millions of workers are furloughed - defying gravity is an apt summary of the numbers we’re seeing.
The total number of 686 registered company insolvencies for England and Wales is made up of:-
There were no receivership appointments recorded last month.
In the previous year of lockdowns, the total number of insolvencies has been lower than the previous month 10 out of 11 times.
Additionally there were 26 company insolvencies in Scotland (7 compulsory liquidations, 16 CVLs, 2 administrations and 1 CVA), down 70% year on year with 5 in Northern Ireland (all CVLs), down a huge 81% annually, making an overall UK total of 717.
The Insolvency Service sticks to their perfectly logical explanation that the results are depressed against normal expectations due to a mixture of the pandemic and response itself and the various ongoing and extended government support schemes.
The more well-known being the Coronavirus Job Retention Scheme, Self-Employed Income Support Scheme and Bounce Back Loans.
Equally impactful is the ongoing suspension of creditor actions such as statutory demands and winding-up petitions which are currently due to begin again after March 31st 2021 but, like other support measures, could be extended again.
The Insolvency Service also notes that more companies are taking advantage of other new procedures created last year including having restructuring plans sanctioned by courts and insolvency moratoriums.
“Insolvencies stemmed rather than stopped”
Colin Haig, President of R3, the insolvency and restructuring trade body said: “The fall in corporate insolvency numbers has been driven by a reduction in all corporate insolvency processes.
“Despite the fall in insolvencies, February continued to be tough for businesses and the economy. The national lockdown meant people weren’t able to celebrate Christmas and New Year as they have traditionally, which will have hit a crucial trading period for many businesses, and had an impact on their success - and in some cases through the first quarter of the year.
“Government support has been and continues to be a lifeline for many - and has stemmed rather than stopped the flow of insolvencies we would expect to see in this kind of economic climate.
“In addition, the usual ‘trigger points’ for action, such as winding-up petitions or repossession notices, are out of the picture at the moment, with many company directors putting off examining their options as a result.”
While it’s complicated trying to find an accurate attribution for the quote “complacency is the enemy of progress” - there’s no denying its wisdom.
The current benign conditions for struggling companies to avoid creditors cannot and will not last forever. Statutory demands and winding up petitions could be being issued once again by the end of the month so time is short to start making plans if your business is facing financial challenges.
We’ll get a full picture of your unique circumstances and be able to quickly advise you on what options you’ve got to protect and strengthen your business right now and when restrictions begin to ease.
Get in touch today and take the first steps into making a more stable future for your business.
It would be wicked not to.
This is the stark headline from the latest quarterly members poll from the Federation of Small Businesses (FSB) published this week.
They reported that just under 5% of their 1,400 respondents said they expected to close down this year - the largest proportion in the history of their Small Business Index survey.
If the same ratio is applied nationwide then as many as 295,000 companies would cease trading by the end of the year.
A further 80% of respondents didn’t expect to see their own prospects improving over the next three months primarily citing that the tougher lockdown restrictions were likely to remain in place.
Just under 25% had already made redundancies during the last three months while one in seven expected to do so between now and the end of March - potentially affecting the jobs of the 16.8 million employees.
Mike Cherry, National Chair of the FSB, said that the amount of government support had dwindled as the pandemic increased in severity and scope.
He said: “At the outset of the first national lockdown, the UK government was bold. The support mechanisms put in place weren’t perfect, but they were an exceptionally good starting point.
“That’s why it’s so disappointing that it’s met this lockdown with a whimper.”
He said that while support for the retail, leisure and hospitality businesses that had already been received it was welcome, many were still being left out in the cold including company directors, the newly self-employed, supply chains and firms that operate without commercial premises.
The FSB wants to see additional support for small businesses including grants, income support and extended debt relief but warn that firms already lack the reserves and resources to manage the tough trading environment.
All of this is before factoring in any further changes that Brexit and the new trading relationship with the EU will bring to them too.
Almost half of the respondents said they expected to see their international sales fall in 2021.
The FSB survey is the first large scale research undertaken this year and underlines some of the challenges immediately facing businesses.
While the vaccine rollout continues and offers hope for a return to normality of sorts in the latter half of the year, companies still have to make it through to this point and be trading in order to take advantage of any pent up customer demand.
One of the best things businesses can do right now is to start making a survival plan based on them still being around for the second half of the year especially if they can’t trade right now.
We can look at what you can do to protect your business immediately through an insolvency moratorium or other rescue and restructuring measures such as CVAs or administration.
These will allow a business to be protected creditors and their recovery measures while getting into the best possible shape to take advantage once pandemic restrictions are gradually lifted, businesses in certain sectors are allowed to reopen and customers begin to shop again - physically and online.
But none of this can happen unless you take the initiative and get in touch first.
SPOILER - it’s the end when, pursued by the police, the two heroines decide to drive off the cliff together rather than be caught by the police.
So when any cliff-edge scenario appears, it’s now shorthand to call it a “Thelma and Louise” situation.
We mention this because amidst all the confusion and worry about pandemic restrictions being tightened even further along with the accompanying economic consequences, there’s a cliff edge approaching businesses in 86 days time.
Actually more than one:-
March 31st Deadlines
April 30th Deadline
With the third national lockdown announced this week, the government has also unveiled additional financial support in the form of one-off grants for retail, hospitality and leisure businesses.
There is also additional funding for local authorities and devolved administrations to support businesses affected by the restrictions that are not eligible for these grants.
Regardless of these temporary support measures, the ultimate end date is quickly approaching for all of the Covid-19 financial support measures.
As well as creditors being able to issue statutory demands for payment and winding-up petitions to enforce them again, landlords will also be able to begin eviction proceedings against their commercial tenants for non-payment of rent.
Not only that but HMRC will be demanding repayment of any outstanding VAT amounts for 2020 that were deferred until this date as well as the VAT rate for businesses.
A month later sees the final end of the Coronavirus Job Retention Scheme/Furlough as well as the return of personal responsibility for wrongful trading.
The Bounce Back Loan (BBL) scheme and Coronavirus Business Interruption Loan Scheme (CBILS) have, to date, supplied over 1.5 million companies with over £63 billion of money to stay afloat which was a measure of their success but the amounts borrowed have to be repaid, regardless of whether the borrower’s business has recovered enough to afford them.
A lot of businesses are on life support at the moment.
But experts fear this is merely forstalling the inevitable.
Colin Haig, president of R3, the trade body for the insolvency and restructuring industry said:
“We simply don’t know what the impact of additional tiers, lockdowns and the developing virus situation will be on insolvency numbers.
“However, we’re quite sure that it’s still a question of when, not if, in 2021 there will be the uptick in insolvencies we are expecting.”
Thelma and Louise is fiction. Entertaining but still fiction. Which is why suggesting they pump the brakes, turn around and live to fight another day might be sensible advice but boring cinema.
Running your business, paying your bills and staff and trying to trade in the most onerous circumstances for nearly a century is reality. So doing the sensible thing and getting expert help before problems become emergencies is the right decision.
We can begin to work with you on the issues you’re facing and give our expert view on what can be done to solve them. Right now is one of the best times in years to get advice and help thanks to some of the tools available to insolvency professionals.
Once we all get through these latest restrictions on our lives and businesses, then you could be in the perfect place to enjoy the benefits from people going out and spending again.
Including popcorn back at the movies!
The sweeping rules that came into force yesterday and will last for a minimum until December 30th will come as a shock to customers and businesses that were starting to look forward to a brighter Christmas trading period.
The main rules affecting hospitality and entertainment sectors include:-
As well as the West End, various local theatres that were preparing for their annual pantomimes will now be closed.
Many professional sports teams who were looking forward to welcoming some fans in for the busy Christmas period will now be playing to empty stands once again. Even the famously rambunctious PDC World Darts Championships at Alexandra Palace will only have one night of spectators before the players throw in a cavernous empty hall for the duration of the tournament unless restrictions are lifted at the first review date.
UKHospitality chief executive Kate Nicholls said that the move effectively “cancels Christmas” for their members.
She said: “Putting hospitality businesses back into lockdown, which is effectively what Tier 3 amounts to, is not going to tackle increasing infection rates. There’s still no hard evidence that hospitality venues are a significant contributor for the spike in infections. Cases were higher at the end of the last lockdown - during which hospitality was shut down - than at the start.
“The Government is cracking down on hospitality for an increase in the infection rates that occurred during a period when hospitality was forcibly closed. It makes no sense.
“So many pubs, restaurants, bars, cafes and hotels, having invested so much to make their venues safe, are only just clinging on by the skin of their teeth, but will be forced to take another huge hit.
“The burden of a region being moved into Tier 3 falls almost exclusively on hospitality businesses. It’s an illogical tactic that fails to tackle Covid effectively but does push businesses closer towards failure.”
She was joined by Eddie Curzon from the Confederation of British Industry (CBI) who said: “Retail and hospitality businesses will have been counting on a festive filip to help mitigate months of hardship, and further restrictions now will come as a devastating blow. Thousands of jobs and livelihoods could be at risk.”
Emma McClarkin, chief executive of The British Beer & Pub Association said: “This could completely destroy many pubs in London, Herts and Essex who have taken bookings for the lead up to Christmas and New Year’s Eve if the tiers don’t change before then.
“In London alone, it will see the final 1,250 pubs who remained open in Tier 2, supporting 8,000 livelihoods close. The survival of the great British pub as we know it hangs in the balance.”
Sadly she might be right.
Since the first lockdowns were rolled out in March, 2020 has been a near-extinction level event for the hospitality and restaurant industry.
Many profitable going concerns, through no fault of their own, will be forced into insolvency especially if there is no respite this or early next year.
But this doesn’t have to mean the end for them.
There is currently a small window of opportunity that pubs, restaurants and cafes could take advantage of to protect their businesses.
An Insolvency Moratorium allows a company to have an automatic 20 day freeze on all creditor recovery actions which can also be extended for another 20 days or longer if necessary.
The moratorium stops:-
The valuable time the Insolvency Moratorium buys allows the business to work with an insolvency professional to work out how they can restructure their company to survive the current storm and reemerge in a stronger form to grow again once vaccines are rolling out and tiers are being lifted.
Get in touch with us today to see how you and your business can benefit from an insolvency moratorium or other business rescue processes like administration or a CVA.
Nobody knows how the next few weeks will play out but it’s going to be expensive even for well-financed hospitality businesses.
Even if you have the resources and the will to navigate these incredible times, there’s help available to make it easier.
Then you can hopefully begin to look forward to a happier New Year.
