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.
We’ve all seen multiple examples of it on social media especially, people will gleefully share false news and images that a simple check of the BBC or other reputable news site could tell them is not true.
Received wisdom and advice can be harder to disprove than this so we find it annoying when we hear false and wrong advice passed off as something credible.
One example we’re sadly hearing a lot about recently is the idea that companies with debts, including bounce back loans, business rates and VAT arrears, can simply dissolve themselves and these obligations away into thin air.
Usually sensible people have been taken in by this one in particular - we even had a good client ask us “why should I pay for my company’s liquidation? Can’t I get it for free if it’s struck off?”
Why are businesses with outstanding bounce back loan borrowing being stopped from closing down?
The main reason why you should consider a voluntary liquidation rather than a strike off is because of the directors investigation aspect.
The liquidator has to investigate the conduct of the directors in the lead up to the liquidation as a mandatory part of the process but if you have done everything in your power to keep the business running and have kept your records in good order then you’ll have nothing to worry about.
Even if, in hindsight, you’re worried about how a couple of your decisions and actions might be viewed, you can explain the circumstances and rationale to the liquidator and if you can provide supporting evidence, they will be quite likely to accept your version of events and say so in their report to HMRC.
The same doesn’t apply for directors who try to strike off or dissolve their company with outstanding debts - whether they be bounce back loans, CBILS, VAT arrears or other tax payments they owe.
The rules about striking off are very strict and explicit - no company with debts can be struck off.
But this doesn’t stop some unscrupulous business owners from trying to dissolve the firm to avoid their obligations - or honest directors that have received some bad advice and been told that this is possible.
There’s a new law making its way through parliament at the moment - the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill - that will give dishonest directors some pause for thought.
Right now director disqualifications can be implemented for clear offences such as falsifying records and taking money out of an insolvency business.
Any attempt to defraud HMRC by deliberately avoiding paying bounce back loan debts for example, would also very likely lead to disqualification.
The HMRC have held their fire considerably during the pandemic and subsequent lockdown periods because of the unique situation a lot of otherwise viable and profitable businesses found themselves in.
Things are changing as more industries begin to trade without restrictions, HMRC and The Insolvency Service will also be moving up the gears to begin recouping some of the historic levels of support paid out.
One way they will do this is by using new powers given to them by the bill that allows retrospective investigations and actions to be taken against directors for the first time if they’re found to have dissolved their company with outstanding debts.
Company strike offs and dissolutions will be examined to see if any were carried out with outstanding debts and if discovered could lead to punishments including fines, disqualifications of up to 15 years and personal financial liability to settle the debts placed on the directors.
Business Secretary Kwasi Kwarteng said: “We need to restore business confidence and people’s confidence in business.
“This is why we won’t hesitate to disqualify directors who deliberately leave employees and taxpayers out of pocket. Extending powers to investigate directors of dissolved companies means those who have previously been able to avoid their responsibilities will be held to account.”
Chris Horner, Insolvency Director with Businessrescueexpert.co.uk, sets out the likely scenario.
“The new legislation is clearly aimed at those directors who thought they’d be clever and try to dissolve their companies to avoid paying their creditors - including HMRC.
“Directors who’ve done the right thing and liquidated their companies voluntarily through a creditors voluntary liquidation (CVL) or other process don’t have anything to worry about from the bill.
“Dissolution or striking off a company is a cheap and efficient way of closing a dormant or debt free business and thousands of businesses do it every year.
“It’s the small minority of directors who thought it was a great way to dodge their debts that should rightly be dreading a letter, email or increasingly possible from the end of September - a knock at the door.
“An important point to make for businesses that legitimately took out bounce back loans or CBILS borrowing is that they aren’t HMRC’s primary target either.
“ As long as they have kept records and documentation or other evidence that supports their explanations on how the money was used, why they borrowed it, how their business functioned during the pandemic then they can be confident that they can answer any questions fully and convincingly.
There are several other good reasons why you should be happy to liquidate your business voluntarily:
You can take advice and pick the insolvency practitioner choice of your choice to oversee the process and guide you through the issues and requirements.
If a company goes into liquidation any personal guarantees directors have given on debt will crystallise - becoming payable immediately. A liquidator will help you create a plan to deal with this situation. Similarly, a liquidator has a duty to recover any funds owing from overdrawn directors loan accounts and can advise ahead of time the best course of action to deal with this eventuality.
A liquidator can advise on the redundancy procedure for existing staff and/or the transfer of existing staff to a new business (TUPE).
One often overlooked but important detail is that directors who have been paid via PAYE are also eligible for redundancy payments.
The liquidator can advise the best way forward to access what could be some vital income - especially as it may be possible to use it to finance the liquidation process with the proceeds.
There are a lot of things that have to be done correctly in a liquidation and it can be easy to lose track of them, especially if your attention is being pulled in several different directions.
The liquidator will keep you on track of what needs to be done, how and when including the sale of assets, transfer of leases and several other requirements.
Topics such as liquidation and dissolution can be stressful at the best of times but even more so when sanctions such as disqualification and being made personally liable to repay any debts your company was closed down inappropriately or deceitfully.
The vast majority of businesses that have closed down in the past two years have nothing to worry about. They did their duties to the best of their ability and made the difficult but ultimately correct decisions to close their companies down.
Several others might now be in a similar position and are nervous that although the correct decision is to liquidate the business, this wouldn’t be the end of matters for them or the company.
We can reassure them in one conversation.
After a free initial consultation with one of our expert advisors, directors will have a far clearer idea of what options they have to close or restructure their companies, the costs involved and what the likely timescales will be.
Then, for the first time in a while for many, they will finally be able to see an end to their problems and be able to think of new beginnings instead.
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”.
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.
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.
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.
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.
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.”
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.
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.
Others will wait until the engine warning light comes on because this is a sure sign that something isn't right.
Others still will be happy to drive along with the engine on fire, black smoke billowing from every hole and window until stopped by the authorities. They’ll throw up their hands and question why they’ve been stopped. If the car’s still going then there’s no problem, is there?
Anyone with an interest in the UK’s hospitality industry must feel like they’re in the third scenario right now. Red lights are flashing everywhere and it couldn’t be any more of an emergency than if they were on fire themselves.
The latest alarming evidence came with the publication of a new survey from the Night Time Industries Association (NTIA) - the representative body for this section of the hospitality sector.
400 respondents took part and even in this year of shocking news and statistics, the findings are stunning.
The stark headline is that three quarters of pubs and clubs operating in tiers 2 and 3 expect to be permanently out of business by Christmas.
75.6% said that without support, they would not be reopening again.
Just under this total said they’d been forced to make staff redundancies this year while nearly two thirds said they’d made over 40% of their workforces redundant already.
Michael Kill, Chief Executive of NTIA, sounds like a man with no more figs to give.
“This announcement by the government has led us to believe that they are intentionally aiming to collapse our sector.
“Every town and city across the UK stands to lose valued and much loved venues. This will be another stab in the heart of our town and city centres.
“We stand to lose the cultural institutions and amazing workforce of professionals that the UK are renowned for globally. Our clubs, bars, venues, security, freelancers, staff, managers, DJ’s and many more will lose their livelihoods and continue to suffer financial hardship without government intervention.
“I make a direct appeal to the Prime MInister - Mr Johnson, what are you doing to save the lives and livelihoods of the many businesses and workers within the night time economy, businesses that have been closed since March and are continuing to suffer?
“They have staff and freelancers that will lose their jobs irrespective of furlough because the businesses won’t survive.
“What do you say to that Prime Minister, I hope you’re sleeping well at night because thousands within our sector are struggling to sleep, in fear of their future.”
The survey also found that just under three in four respondents were commercial tenants and 77.6% said they were more than two quarters in rent arrears too.
The government has been commendably agile in devising and implementing support schemes this year including the Coronavirus Job Retention Scheme (CJRS), Bounce Back Loans (BBL) and several other initiatives such as rent holidays and VAT suspensions.
But there hasn’t been and can be no economic “magic bullet” solution that will save every business and every job.
The Chancellor himself and others have been unusually forthright about this and recognise the gravity of the situation but it’s still hard not to feel sympathy for everyone in the hospitality sector, not just the night time bars, clubs, pubs and venues, but restaurants, cafes, bistros, micropubs and coffee shops too.
Sympathy won’t pay the bills however and given the forbearance of creditors is not infinite, the window for finding help is perilously close to slamming shut.
Back when there were only four TV channels, the same films would be shown at Christmas every year - the only thing that changed is which of the channels they’d be on.
The one that got most attention is the excellent but definitely unchristmassy “The Great Escape”.
It’s a tremendous misnomer because for a film called and about a large number of prisoners escaping from a POW camp, the actual number who do ultimately get away, three, is incredibly small. Most just don’t make it.
This is the scenario facing the majority of not just night time venues but most of the hospitality sector. That the majority might not make it.
Once this unpalatable but realistic scenario is recognised then the next step is easier - doing something about it.
As well as the various Covid-19 support measures, the government has suspended some insolvency rules and introduced others to make administration not just a viable but an attractive option for many businesses that’s only other path would have been liquidation.
Get in touch with us today and we can let you know what options are available for businesses that are themselves or in a sector that is in trouble.
We can quickly arrange a free virtual consultation where we can better understand the unique challenges you’re facing; what strengths and assets you’ve got to rely on; what the biggest threats are and what you can do to protect, rescue, restructure and relaunch.
We’ve got some tremendous tools to help businesses survive but we can only do so if they let us know they need them. Because despite the odds, for some a great escape can be achieved in the end.
Because these aren’t normal economic circumstances however, they need some large asterisks next to them.
The overall number of company insolvencies was down 23% based on the first quarter of the year and down a third (33%) on the same period last year.
There were a total of 2,974 company insolvencies in England and Wales for the quarter - down from 3,848 from Q1 2020 and 4,425 from Q2 2019.
There were 195 compulsory liquidations (down from 707 in Q1); 2,346 creditor voluntary liquidations (CVLs - down from 2,673); 386 administrations (down from 398); 47 company voluntary arrangements (CVAs - down from 47) and one receivership which is at the same level.
Creditors Voluntary Liquidations form the vast majority of company insolvencies making up 79% of all cases. These were down 12% on the previous quarter and down 24% from the same period a year ago.
Compulsory liquidations saw the largest percentage decrease of all categories with a reduction of 72% on the last quarter and 76% from Q2 2019. Company voluntary arrangements were down 32% from Q1 and nearly half from 12 months previously while administrations saw a slight reduction of 3% from Jan to Mar this year and a 10% decline from Q2 2019.
Now clearly the effects of the coronavirus pandemic and subsequent lockdown are working their way through the system but this can’t solely explain the precipitous drop off in activity.
There are four main factors at work that are reducing the expected rate of company insolvencies:
The Insolvency Service have also been at pains to point out that they are not recording whether an insolvency is directly related to the pandemic so cannot state with any certainty its direct effect on insolvency volumes.
In the coming weeks and months this grey area will become highly scrutinised as statisticians and policy makers look to find evidence and justification for existing and future policies.
While every industry saw a reduction in the number of redundancies in their sectors, construction still had the highest number with 2,778 insolvencies. Wholesale & Retail Trade saw 2,177 while Accommodation & Food Service - comprising the hospitality and restaurant industries - had 2,026.
Additionally 176,115 new company incorporations were recorded in the UK which is an increase of 3.7% on the previous quarter.
There were only 14,606 dissolutions recorded in Q2 which is a huge fall of 89% on the previous three months. This was accredited to the easing measures listed previously.
While the unexpected good news is as welcome as August sunshine, it will also inevitably give way to chillier Autumn weather and probably chillier still insolvency numbers.
Your business is not a number - it’s made up of hard-working people that you might have employed for years and you’ll do everything you can to keep them and your company together.
Get in touch with us now while you’ve got some time and we can work with you to see what options you’ve got to make sure your business makes it through the rest of 2020 and beyond in the best possible shape.
A free initial, virtual consultation could be the ideal place to talk through your ideas, outline your concerns and begin to reshape your business for the change economic environment it will inevitably find itself in.
The BBL was designed to have simpler qualifying criteria and to provide both a swift decision and if affirmative, equally quick remittance. However, there are still a number of small businesses that will have their bounce back loan application rejected.
The only official criteria for rejection of the application is if the business was already experiencing financial difficulties as at 31 December 2019. This can include county court judgements against the business, arrears with HMRC, or in some cases may be as simple as consistent trading losses and a big deficit on your balance sheet.
Unfortunately, based on the availability of these loans, for those whose applications are rejected, it may be time to consider formal insolvency options, if this is pointing to a pre-existing issue with the business prior to the emergence of the virus.
Here's a quick guide to what your business can do if you’re turned down for a BBL or any other kind of assistance or credit line:
A lot of business owners and directors get very nervous when they hear the word "administration" - especially when it’s associated with their own company.
They shouldn’t. It’s a useful tool to help buy time for any business that needs some breathing space to get its ducks in a row and restructure itself to be more resilient and robust when it reemerges.
A company going into administration will automatically be protected from creditors and their demands by way of a moratorium.
It's still a formal insolvency process and shouldn’t be entered into lightly, as the business will still come under the control of a qualified external administrator but their job is to ensure the best return for creditors.
This may be done through a pre-pack administration, where a buyer is found for the business prior to entering administration, whether this is a third party or a management buyout.
An administrator won’t keep a failing business going out of duty or goodwill. If there’s no viable way for the business to survive then they would look to close it and obtain the best value for any creditors through the sale of assets.
If a business is a solid proposition however, and just needs a temporary respite to refuel and re-energise then administration could be the best option.
A business that enters a Company Voluntary Arrangement (CVA) accepts that the way ahead is blocked but there might be a longer route it can take to get back to profitability - but it needs its creditors to agree to the detour.
Creditors may agree to write off a proportion of debt and accept lower regular payments on the remaining debt for the length of the CVA.
The company will get the same protection against creditors actions as any business entering administration including winding-up petitions; they can still look to restructure but they’ve committed to making these regular payments as a concrete gesture of goodwill towards creditors that have given them a break when they need it most.
Just as it’s important to encourage hope when there is a chance of turning around a business, it’s necessary to recognise the end of the road when you see it and apply the brakes.
If there’s too much debt to overcome and it’s impossible by all regular measures that a company could trade its way back to profitability in any circumstances, let alone an economically devastating global pandemic, then liquidation is the only logical response.
A CVL is when the directors or shareholders of a business recognise the unavoidable truth and appoint a liquidator to close the company and raise whatever funds they're able to to pay creditors.
This is a one-way ticket for any company and while it’s never entered into lightly, it can be the best way forward for everybody associated with a terminally insolvent company.
One thing that more than a few directors overlook while trying to run their business or keep it afloat in unprecedented conditions is their status.
We don’t mean personalised parking places or expensive seats, but that as well as being directors the majority are also employees.
If you take a portion of your salary through PAYE rather than exclusively through dividends or other remuneration arrangements then you’ll automatically be eligible for director’s redundancy pay and other entitlements where due - unpaid wages, outstanding holiday pay, notice pay and any unpaid pension contributions. If the company is unable to pay, this is covered by the Redundancy Payments Service.
It’s all our friends at Redundancy Assist do so you might want to get in touch with them too if any of this applies to you. They will be happy to provide you with an assessment.
When the unexpected happens people react in one of three ways.
They can make a snap decision based on their emotions at the time; they analyse and consider their situation, look at evidence and advice before deciding what to do or they freeze and consciously not make a decision, allowing events to play out as they will.
Only one of these has a far higher chance of success than the others and if you’ve read this far it’s because you're analysing and considering your decision.
Spoiler - that’s generally the right call.
We can’t guarantee that we can magically save a failing business or that your creditors will waive their claims and send you on your way with a cheery wave but we will do everything we can to make sure that you’ll have the best chance of rescuing your business.
Contact us today and together we’ll take the first step to help your business bounce back.
Fortunately we’re able to work remotely and still remain in constant contact with our team and clients to help and support them.
One thing we thought we’d start sharing with you are some of the questions we’re being asked about lockdown and how some of the new rules and initiatives could impact on your business.
The first question is - Can you furlough staff and still put your company into administration?
We’re probably going to see a working example of this in operation this week if, as widely anticipated, both Debenhams and Cath Kidston go into administration.
The simple answer is yes. However, this only applies to the administration process. When the company starts the liquidation process, it will not be possible to apply for or receive furlough payments. Employees and directors on the payroll will be entitled to up to 8 weeks wage arrears at full pay (up to £538 per week) and other entitlements upon being made redundant. This will be paid by the redundancy payments service within 2 - 6 weeks.
If a company goes into administration during the coronavirus pandemic response period then the administrator will be able to access the Coronavirus Job Retention Scheme (CJRS) on the behalf of the employees.
Every private UK company, whether in administration or not, is eligible to access support to pay wages for staff that would otherwise be made redundant. Following a number of court decisions, the administrator must still agree a variation to the employee's terms within 14 days of appointment. Employees who do not agree to the variation would likely be made redundant after 14 days have passed.
HMRC will reimburse the company with 80% of furloughed workers' wage costs up to a capped maximum of £2,500 per month. This only applies to normal pay and does not include any commission or bonuses the employee might usually receive.
Furloughed employees may be able to work for another employer during this period providing it doesn’t breach their contractual obligation with their current employer which remains in effect.
The furlough pay period lasts from a minimum of three weeks up to originally a maximum of three months, but this has now been extended until the end of June.
A furlough in administration creates a unique situation where you can find a non-trading, trading administration. Effectively the employees will not be made redundant, but will not be expected to work either. At the same time the company benefits from an administration moratorium, allowing time to restructure and rescue the business as a going concern.
Alternatively, it allows time to structure the sale of all or part of the business, setting the business up to start fresh under a new company at the end of the lockdown period. At this point employees can either be transferred under TUPE or made redundant and entitled to their redundancy entitlements from the Redundancy Payments Service.
If you are the director of a company then you may also be eligible to be furloughed but it’s more complicated than a regular employee. You can read more about this here.
-------------------------------------------------------------------------------------------------------------------------------------------------------
Placing a company into administration, whether in a lockdown or not, is a major decision that could have both personal and business implications for you as a director or business owner.
Even if it is the right call, you should only consider it after talking to a qualified professional who understands all the issues and can raise every possible outcome or potential consequence with you.
Contact us today to arrange a free and convenient initial virtual consultation.
Whether administration is your solution or not, you need to understand what other choices are available to you - and the earlier you get in touch, the more choices you’ll find you have.
-------------------------------------------------------------------------------------------------------------------------------------------------------
It’s hard to keep track of all the changes and announcements that might affect or benefit your business during the response to the Coronavirus Covid-19 pandemic.
That’s why we’ve created a resource page where you can read about all the help that’s available as well as the latest news that’s happening during this unique period for us all.
Another source of surprise and delight is when they find out that even if they were a director of their company, they may still be entitled to redundancy payments as any of their employees were.
Depending on how their income from the business was structured - the split between Pay As You Earn (PAYE) and dividends for example - the amount they are due will affect the potential of how their salary rate is calculated.
The key point is that in order for a director to be able to access any redundancy payments from the Redundancy Payments Service (RPS), they actually have to be an employee of the company - not just an officer holder or a controlling shareholder who wasn’t also employee director.
Carrying out daily activities for the company and getting paid a salary with a portion of it going through PAYE is a strong indicator of actual employment even if they are a director and 100% shareholder.
Another strong piece of employment evidence is having a written contract of employment. While many shareholders and directors don’t have one, it should be noted that the absence of one doesn’t automatically prevent them from successfully accessing appropriate redundancy payments later on.
Whether you’ve considered applying for redundancy payments after your business has closed or not, why not contact us anyway for advice on liquidation?
It costs nothing to click a link and it costs nothing for one of our expert advisors to arrange a free initial consultation to discuss how best to close your business.
If we progress your case then our friends at Redundancy Assist can review your employment entitlements. Don’t worry - they’re real experts, know redundancy law and practice inside and out and unlike us, they do bring donuts to their meetings!
The British Retail Consortium - UK retail’s trade association - announced that there was another fall in retail jobs of 2.3% in Q2 2019 compared to the previous quarter in 2018.
This is equivalent to approx. 72,000 positions and is the 14th consecutive quarter-to-quarter decline.
Helen Dickinson, Chief Executive of the British Retail Consortium, said: “We’ve seen retail employment falling across the country.
“Such declines are likely to endure, hastened by government policies that continue to add costs to an industry already under immense pressures.”
As we’ve written previously, online sales are a significant part of the mix already and are only going to increase to the detriment of physical sales.
As a result, there is less demand for shop staff, their wages and expensive, rented high street stores.
Automation in the form of self-service checkouts is also a factor which is likely to increase in the coming years.
The consortium has saved it’s fiercest criticism for business rates saying that while retailers account for 6% of the UK’s GDP, they pay 26% of all business rates. The findings also show that slightly more full time positions have been lost than part time as stores value flexibility and their own roles change: “centered more on customer experience and offering social activities, for which fewer staff are needed.”
Combined with falling consumer spending, the retail sector thinks it could be a great opportunity for the political regime to make its mark. Helen Dickinson said: “With a new prime minister and cabinet in place, there is a clear opportunity to rethink the high street strategy. Business rates pose an unsustainable burden on shops and jobs.”
Whether you think help is coming or not, if your business is experiencing a downturn in sales, staff or momentum then get in touch with us.
Our expert advisors will set up a free initial consultation where we can examine the issues bedevilling your business line-by-line and see what strategy will be the best for your company right now.
