For instance, it’s common sense for builders, scaffolders and cement pourers to be classed together under construction but what about a travel agent and a security guard?
Or a car leasing company and a landscape gardener? Or an employment agency and a bouncy castle hire business?
They all come under the seemingly disparate title of administrative and support businesses which is a broad umbrella title that covers amongst others:
So now we know which sort of businesses we’re talking about - how did they collectively manage during the year of lockdowns and afterwards?
Less is more
The initial figures show that in the year leading up to the first lockdown being implemented - Mar 2019 to Feb 2020 - there were 1,798 insolvencies involving businesses in the administrative and support sector.
The immediate 12 months afterwards - Mar 2020 to Feb 2021 - saw 1,421 administrative companies close.
Although this is 377 less, it’s still larger than might have been expected considering the temporary halt on creditor actions like winding up petitions and the range of additional support made available to businesses over the past 18 months.
1,421 is a larger number than the losses reported by the hospitality and retail sectors, which were most popularly believed to be the worst affected in the pandemic with 1,378 hospitality companies and 1,355 businesses in the retail sector becoming insolvent.
According to official statistics supplied by the Insolvency Service, there have been an additional 358 insolvencies in the administrative sector since March this year which takes the total number since lockdown to 1,779 - which is 118 a month or 29 a week shutting their doors.
Did bounce back loans soften the blow?
The coronavirus jobs retention scheme or furlough, did help a lot of administrative businesses keep staff rather than forcing them to be made redundant.
As the travel industry ground to a halt and nightclubs and other sectors that would usually require security staff didn’t need them, administrative businesses with no income needed support and quickly.
The bounce back loan scheme and CBILS was rolled out for just such a purpose and these companies made use of it.
The number of loans taken out by administrative services was 102,946 - more than the collective borrowing of the manufacturing, real estate and transportation business sectors.
The total amount borrowed was £3 billion, which is an average borrowing amount of £29,141 per company.
Under the most conservative official estimates, it’s expected that 15% of the total lent to the industry would remain uncollected would be £450 million but if the default rate rose to even 40% then this figure would also grow to £1.2 billion.
You can still close your company even if you have bounce back loan arrears - find out how
Since pandemic restrictions began to be lifted, administrative businesses can begin trading again and supplying their valuable services to customers but there are storm clouds gathering on the horizon.
The furlough scheme is finally being wound up at the end of September which means businesses either have to bring their furloughed workers back on full pay or implement redundancies.
Any bounce back loan or CBILS arrears will continue to grow if they’re not being paid and any outstanding VAT arrears from their suspension in 2020 are now due too.
Creditors will also be able to begin to take action to reclaim unpaid debts from September 30th too, allowing them to seek statutory demands and winding up petitions if not paid within 21 days of receipt.
Chris Horner, Insolvency Director with BusinessRescueExpert.co.uk said: “Administrative businesses have had one of the worst hands dealt to them during the pandemic and lockdown.
“A lot of them didn’t qualify for any support other than bounce back loans and repaying these could become one of the biggest challenges businesses face this and next year if they aren’t able to trade like they did before.
“The travel industry is still in flux to put it mildly, hospitality and nightclubs are just reopening but will need to comply with new rules and regulations shortly with little guidance being given to their security on how they will be implemented.
“The shakeup in the commercial property sector will have big knock on effects for cleaning and landscaping businesses that service them so will make their financial forecasting nearly impossible to predict too.
“One thing administrative and service businesses can do is adapt and adapt quickly so they can use their talent and experience to take advantage of the little time left before September 30th and get some professional advice on how they can help themselves before so many rules change.
“A recovery strategy can work but only if it’s created and implemented now. This can include managing any unsustainable debt including bounce back loan arrears, VAT arrears or CBILS.”
A lot of people thought that by the end of September 2021, if not business as usual, we’d be at a stage of business getting back to usual.
But for many companies and sectors - especially administrative and support businesses - it really isn’t.
Debts have increased, more are appearing and the last protections from creditors are days away from being removed.
There could still be a practical way forward for a business in this position but only if they take the first step and get in touch to arrange some practical, professional advice.
We offer directors and business owners a free, initial consultation to set out their position and once we get a full understanding of the issues we face, we can work with them to create a strategy to meet and defeat these challenges.
But get in touch today because after September 30th, the choices might be harder still.
This is because they’re more susceptible to immediate fluctuations rather than gradual trends.
The number of company insolvencies declining across the UK in July after rising for two consecutive months was still a slight surprise in the latest official monthly company insolvency statistics released by The Insolvency Service.
For England and Wales, the total number of corporate insolvencies for last month was 1,094 - this was down 112 (9.3%) from the 1,207 recorded in June’s total but still 13.4% higher than the 741 recorded in July 2020.
While both totals are still below the 1,442 recorded in July 2019, a 24% reduction for 2021, it is the third consecutive month that year-on-year figures are higher than 12 months ago - indicating a broader recovery towards pre-pandemic levels.
112 cases is a relatively small number and combined with the residual effect of the summer holiday season and the general upward trend of cases we should expect this to begin to rise by October at the latest.
The reduction in monthly cases is the first since April and with creditor actions such as statutory demands and winding up petitions due to be reintroduced at the end of September along with the widely expected withdrawal of the furlough scheme and other support measures, it’s logical to speculate that insolvency rates will be a lot higher by the end of the year.
Of the 1,094 company insolvencies recorded in July in England and Wales there were 1,007 creditors voluntary liquidations (CVLs); 41 compulsory liquidations; 40 administrations and 6 company voluntary arrangements (CVAs). Once again, there were no receivership appointments in July.
Compulsory liquidations and administrations saw small rises from June - up three and one respectively, while there were 109 fewer CVLs and eight fewer CVAs.
The only category that isn’t lower than its 2019 equivalent are CVLs which are at the same level.
Additionally:-
There were 72 company insolvencies in Scotland last month comprising 14 compulsory liquidations; 54 CVLs and four administrations. Overall these figures were 36% higher than a year ago but 26% lower than in 2019.
Historically, compulsory liquidations have been the most common kind of insolvency registered in Scotland but since April 2020 there have been twice as many CVLs as compulsory liquidations. This has been the situation for 14 out of the preceding 15 months.
There were also 14 company insolvencies registered in Northern Ireland - 40% higher than in July 2020 but 33% lower than for July 2019.
This was made up of one compulsory liquidation, nine CVLs and an administration.
The overall total of UK company insolvencies for July 2021 is 1,180, an overall decrease of 115 from last month’s collective total.
“It will take longer for the worst hit sectors to recover from the pandemic”
Colin Haig, President of R3, the insolvency and restructuring trade body said: “The month on month fall in corporate insolvencies was as a result of a drop in compulsory liquidations, CVLs and CVAs.
“However, this is the third consecutive month in which year-on-year corporate insolvency levels have risen, which reflects the effect the pandemic has had on the business community.
“The 70.4% increase in CVLs this month compared to July 2020 suggests an increasing number of directors have decided to close their business after spending a year trying to survive the pandemic.
“Although government support has continued to provide a lifeline for many businesses which would otherwise have struggled in an economic climate like this, this July was still a challenging month.
“The delay in lifting the final restrictions will have hit trading, footfall and spending, and a huge number of firms have spent 15 months trading in conditions that are wildly different to normal.
“With the opening up of the economy, consumer confidence at pre-pandemic levels, and spending levels higher than they were in 2019 the future does look more optimistic. Having said that, it will take longer for the worst hit sectors to recover from the pandemic.
“SMEs are the backbone of the UK economy, but many have been badly affected by the pandemic. The restructuring community is better placed than ever to help them and other organisations with financial worries, but if directors leave it too late to ask for help, they will have fewer rescue or recovery options open to them.”
We couldn’t agree more.
One of the main advantages of getting in touch with us and arranging a free initial consultation is the earlier a director or business owner does it, the more options they will have available for their company.
Depending on their goals and ambitions for the business, either restructuring the business and its debts are appropriate or if there is no viable way forward in the immediate future then there are several efficient ways to close the business down instead.
No matter what direction you want to go in, there will be an insolvency procedure to achieve it but only if you get in touch.
Creditors will be allowed to begin recovery actions in only a few weeks so you can be sure they will be keen to exercise their options as soon as they can.
Make sure you use this time to exercise yours.
But in many ways, despite lockdowns being lifted and restrictions easing across England, Scotland, Northern Ireland and Wales, this is exactly what’s happened.
Since the Covid-19 lockdowns began the Insolvency Service has been providing monthly figures on the number of businesses that have undergone an insolvency procedure such as administration, company voluntary arrangements (CVAs) or liquidations.
For retailers the figures are sobering.
Since May 2019, 1,316 retailers have entered insolvency. This is a rate of 110 a month or more than four a week.
This is with the restrictions on creditors’ recovery actions such as statutory demands and winding up petitions that are due to be lifted at the end of September at the same time that all other Covid-19 support ends including the furlough scheme.
Why a CVA could be retails best defence against the multiple threats it faces
Earlier this year we investigated how much bounce back loan borrowing had been done by businesses in each industrial sector and found that retail businesses had collectively borrowed the most.
216,718 loans were granted to retailers while the scheme was still running for a combined total of £7.7 billion which is an average of £35,530 per retail borrower.
This is the equivalent of building a new Wembley Stadium and still having £1.6 billion in change left over.
We also looked at the estimated rate of defaults and even under the best case scenarios we modeled - 15% of loans remaining unpaid - this would still be £1.16 billion missing from the public purse.
Against this backdrop, sales are beginning to rise with annual sales growth for July for the sector standing at 6.4% although this is steady rather than spectacular as the three-month average was 14.7%.
Any positive news in the sector should be cheered at the moment as it finds itself fighting to reestablish itself on many different fronts.
Another worrying statistic to illustrate this came this week with new research published by the British Retail Consortium and the Local Data Company (LDC).
It shows that more than one in seven shops are now vacant across the country - including high streets, retail parks and in shopping centres - the highest levels since 2015 and the highest ever recorded by the LDC.
Indoor shopping malls now have a vacancy rate of 20% too, underlining how the enforced change in shopping habits over the past 18 months along with high profile brands such as Debenhams and the Arcadia Group which owned Topshop, Miss Selfridge and Dorothy Perkins, went into insolvency and liquidation after selling these brands to new operators where they became online-only.
Regionally, the North East of England had the highest overall proportion of empty shops at just over a fifth and saw the biggest increase in vacancies during the last 12 months.
Greater London proved the most resilient with a rate of 10%.
Helen Dickinson OBE, Chief Executive of the British Retail Consortium said: “The retail vacancy rate is continuing to rise.
“Many shops and local communities have been battered by the pandemic, with many high streets in need of further investment. Unfortunately, the current broken business rates system continues to hold back retailers, hindering vital investment into retail innovation and the blended physical-digital offering.
“The Government must ensure the upcoming business rates review permanently reduces the cost burden to sustainable levels. Retailers want to play their part in building back a better future for local communities, and the government must give them tools to do so.
“The vacancy rate could rise further now the Covid-19 business rates holiday has come to an end. The longer the current system persists, the more job losses and vacant shops we will see.
“July continued to see strong sales, although growth has started to slow.
“The lifting of restrictions did not bring the anticipated in-store boost, with the wet weather leaving consumers reluctant to visit shopping destinations. Online sales remained strong, and with weddings and other social events back on for the summer calendar, formalwear and beauty all began to see notable improvement, so fashion outlets in particular saw a bounce back to pre-pandemic levels.
“As many people prepare to return to the workplace, purchase of home office equipment began to fall after months of high sales, meanwhile other homeware, such as furniture and household appliances continued to do well.”
The government is planning to publish a review of business rates in the Autumn after retailers were given a holiday from the tax throughout the pandemic. This tax break began to unwind last month and will end for all businesses in March 2022.
Lucy Stainton, Commercial Director for the Local Data Company added: “After an initial flurry of CVAs and closures due to consumer behaviour shifts and cost-cutting exercises, retailers are now starting to dust themselves off with cautious optimism, keeping an eye on the rapidly changing infection rate and the pace at which vaccinations are taking place; two measures that could seriously derail the recovery efforts should they not go in the right direction.”
Retailers expecting a fantastic sales surge will have been disappointed this summer season.
Several will have invested a lot into their businesses ahead of an expected grand reopening and if they metaphorically put their foot on the gas - they’ve got a whimper instead of a roar.
Sadly for them and every other firm struggling with their bottom lines right now - bills and debts continue to arrive even if the expected sales haven’t.
With the last of the Covid-19 support measures being withdrawn in the next few weeks and creditor actions being reinstated at the same time, it could be a sharp and uncomfortable Autumn for a lot of otherwise profitable businesses.
Because time is running out, we’ll get straight to the point - get in touch with us today.
We won’t waste your time with fancy theories or upselling you services you don’t need. We’ll use your free initial consultation to find out precisely what you’re up against, then come up with some timely and effective solutions you can start to put into practice straight away.
Things are going to get more uncomfortable for a lot of retailers before the year is out so by using the time you have now to arrange a restructuring and rescue strategy or other methods depending on your goals, you can spend it doing more important things - making more money.
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.
The government announced that current restrictions on statutory demands and winding up petitions will remain in place for a further three months to protect companies from creditor enforcement action where their debts relate to the pandemic.
The last sentence here is crucial - “where their debts relate to the pandemic”.
There could easily be test cases being brought where creditors argue that the pandemic was immaterial in the case, especially if debts were incurred before March 2020 when the first lockdowns were implemented.
In addition to the ongoing ban on actions, larger suppliers are still unable to cease supplies or ask for additional payments from customers that are undergoing a business rescue process, although small suppliers don’t have to continue to supply companies in insolvency.
Also if a business has been subject to an insolvency procedure in the previous 12 months such as administration or a company voluntary administration (CVA), they will be able to enter an insolvency moratorium with relaxed criteria until the September 30th expiry date.
Lord Callanan, Minister for Corporate Responsibility, said: “We’re extending these important measures to give businesses the extra breathing space they need as we cautiously reopen the economy.
“With the threat of aggressive creditor action and insolvency eased, companies will be able to focus all their efforts on their recovery.”
Why a CVA might be your company’s best defence this Summer
Reaction from retail landlords is understandably negative to the extension of the rent & eviction moratorium until the end of March 2022 pointing out that retailers can pay bonuses and dividends to shareholders, and while they have to start paying business rates again from July, rent can be waived for a further nine months.
By the time it’s due to end the commercial rent moratorium will have been in place for two whole years.
The British Property Federation argues that local authorities will also suffer if unscrupulous businesses exploit the moratoriums and pay no rent.
They estimate that since the restricted measures were brought in, property owners had collectively lost £6 billion in revenue or £1 in every £6 of rent due.
A spokesperson for R3 said: “Many companies across the country will appreciate the action the Government has taken - particularly given the delay to the easing of lockdown announced last week.
“While the extension of these measures will benefit many companies, as time goes on the Government will need to consider the impact on creditors - who have staff and overheads to pay themselves.
“The decision gives directors and business owners a further and possibly final window to plan how they will take their business forward when these temporary measures end.
“We urge them to use this time to seek advice from a qualified professional and to do so as early as possible, so they can benefit from the broadest range of options available and have a greater time period to decide how they will move forward.”
We couldn’t agree more.
Businesses with financial challenges have yet another opportunity to decide what direction they want their company to go in and make concrete decisions right now to give themselves a fighting chance of making it happen.
You could forgive cynical directors who might want to muddle through thinking: “well, this is the fifth last chance so why not wait until the next one?”
Probably because this new deadline coincides with the formal end of the CJRS furlough scheme which would be harder to extend. It will also see thousands of bounce back loans and CBILS borrowers first repayments come due after the first deferral period from earlier this year has ended.
Also three months time will see many thousands more citizens vaccinated and the end of the summer holiday season too.
If you want to improve the odds of your business being around in three, six or a hundred month’s time - get in touch with us today to arrange a free initial consultation.
Then you can really concentrate on pursuing your plans, not frantically consulting the calendar every few weeks for the latest latest deadline.
The number of corporate insolvencies across the UK has also risen slightly in the latest official monthly company insolvency statistics released by The Insolvency Service.
For England and Wales, the total number of corporate insolvencies for May was 1,011.
This is an 8.8% rise on the 925 recorded in April and is 7% higher than the 946 recorded in May last year but still 25% down on the 1,352 recorded in May 2019.
There’s a sense of Deja Vu about this set of statistics.
Back in December, we saw a rise in insolvencies that also accompanied a rise in general spending just before the Christmas season (although not as much as a traditional one).
We then had another third lockdown and by January the number of insolvencies had collapsed again.
So right now we are seeing increased consumer spending at exactly the same time that lockdown restrictions are being extended for at least the next four weeks which would indicate that it would be surprising to see figures increase next month.
The caveat to this is that while the lockdown is continuing, support measures are not.
The temporary ban on creditor actions such as statutory demands and winding-up petitions is being lifted at the end of June along with a halt on commercial evictions by landlords and employers will also be paying more towards staff furloughs before the CJRS finally winds up in September.
All of which means that the trending direction of next month’s figures will be as intriguing as the numbers themselves.
The 1,011 company insolvencies in England and Wales consisted of 930 creditor voluntary liquidations (CVLs), 31 compulsory liquidations, 43 administrations and 6 company voluntary arrangements (CVAs).
In comparison to the data for the same month from the previous two years, we see how depressed the numbers are right now.
Additionally, there were 51 company insolvencies in Scotland (made up of 8 compulsory liquidations, 37 CVLs, 5 administrations and one CVA) which was 46% higher year on year but 35% lower than in May 2019.
Interestingly, Scottish company insolvencies tended to be led by compulsory liquidations but since the beginning of lockdown in March 2020, company voluntary liquidations have been the highest type of insolvency procedure in 12 out of the 14 subsequent months.
There were also 7 company insolvencies registered in Northern Ireland (made up of one compulsory liquidation and 6 CVLs). This is a rise of two from last month and while 40% higher than May 2020, is 83% lower than the same period two years ago. As a note of caution, when dealing with such relatively low totals, any changes produce high percentage changes rather than being statistically significant in themselves.
The overall UK total of company insolvencies for May 2021 is 1,069, an overall increase of 101 from last month’s collective total.
“Support has held off rather than halted the economic damage”
Duncan Swift, Immediate Past President of R3, the insolvency and restructuring trade body said: “Today’s increase in corporate insolvencies has been driven by a rise in creditors voluntary liquidations, while administrations have fallen to their lowest number since the start of the pandemic.
“While it’s too early to say whether the mild increase in corporate insolvency numbers is the start of something bigger, times remain tough for businesses in the UK.
“Government support has held off rather than halted the economic damage of the pandemic, preventing a serious rise in insolvency levels, but many business owners are now having to look ahead to how they’ll cope when these measures are withdrawn in the weeks and months ahead.
“Business owners will be feeling increasing concern at the prospect of another delay to the easing of the lockdown in England and although the economy continues to grow, there’s still a lot of ground to make up to fully recover from the unprecedented economic contraction in April 2021.
“Consumer spending has increased but it’s still below 2019 levels and while consumer confidence is improving, people are still worried about the future of the economy.”
From investment fund AI algorithms all the way to Mystic Meg, predicting the future is an uncertain science, especially when the variables keep changing.
Restaurants, pubs, bars and other hospitality businesses who gambled on reopening at the end of the month will already be feeling the effects of the wrong call - even though it’s through no fault of their own.
Most other business owners will understandably be nervous about what the next few weeks will hold because all restrictions were absolutely, positively going to be lifted on June 21st until suddenly they weren’t.
With bounce back loans coming due and other support measures ending in a matter of days, getting professional advice on what options are available for directors and business owners should be one of the top priorities in the time remaining.
We offer a free initial consultation where we can learn about what your immediate challenges are and provide you with effective and efficient options you can implement - right now - to help you revive, rescue or begin to restructure your business so you’ll be in the best position when restrictions end for everyone - whenever that is.
Waterloo, Cold Harbor, Belleau Wood, D-Day and Midway were all fought in this month and businesses would be sensible to prepare to defend themselves on multiple fronts by the end of it.
Temporary restrictions on the issuing of winding up petitions and statutory demands are due to be lifted on Wednesday 30th June.
The last day is also the second “Quarter Day” of the year when many commercial tenants rents are due, making it the last rent day which is covered by another temporary ban, this one on the eviction of commercial tenants by their landlords, which is also due to lapse that day meaning that bailiffs will be able to start making calls and visits to delinquent businesses.
Many companies will have built up debts over the pandemic and lockdown periods for understandable and necessary reasons.
They may also have taken out bounce back loans or CBILS loans to make sure they could meet essential outgoings and the repayments on these agreements will also be beginning, in the latter case, at higher interest rates than the 2.5% fixed rate of the bounce back loan.
A spokesperson for R3, the trade body for the Insolvency and business recovery sector, said: “A little cooperation (between creditors and companies) will go a long way towards securing longer-term repayments.
“Aggressive actions to recover debt, while shortly to be allowed once more, would go against the spirit of everything that the Government has done to keep many businesses afloat, and to protect the jobs that they support.
“We would hope creditors will realise that compromise and reasonableness are a better route forward. After coming through so much, it would be a terrible waste to see firms unnecessarily falling by the wayside.
“Many commercial landlords have taken a pragmatic view of their tenants’ positions by recognising the unique situation that was evolving, and agreeing to defer - although crucially not cancel - rent payments.
“However, these landlords have still had their own responsibilities to meet over the last year and a half, including mortgages, insurances, maintenance costs and utility bills, and they will be understandably eager to recover the money they’re owed.
“If a debtor fails to repay then creditors are perfectly within their rights to take enforcement actions, even if difficult trading conditions means that there’s no way they can repay along pre-pandemic timelines.
“The clear concern now is that too swift a return to these businesses having to meet their full cost liabilities in an economy that’s not yet fully functional will be enough to push many of them under.”
Bounce back loans - how much has been borrowed where you live?
Business Rescue Expert Insolvency Director Chris Horner agrees and said: “Some landlords and creditors will be itching to begin recovery action the moment they’re allowed to, so it would be prudent and sensible for businesses to reach out and have conversations with them right now, if they haven’t already begun to communicate.
“While some might insist on trying to enforce unrealistic agreements based on pre-Covid calculations, the majority may well be amenable to making sensible changes to arrangements.”
There are several options a company can pursue if creditors demand their due before June 30th and are intent on following through on their threats.
A smart business owner could employ an insolvency moratorium before then which would halt any subsequent creditor or recovery actions for a further 20 working days while the company explores what options are available to it.
One of these options for otherwise viable businesses that has built up a high debt burden over the past 18 months is a company voluntary arrangement or CVA.
To continue with the military metaphors for a moment, placing your business into a CVA is the equivalent of strategically withdrawing into a heavily defended and impregnable fortress.
Amongst other advantages, a CVA halts all winding up petitions issued against a business and any impending bailiff visits straight away.
An agreement with creditors is negotiated to cancel a proportion of outstanding debts, which could include bounce back loans or CBILS loans, in exchange for regular monthly payments, usually over 60 months, to clear the remaining balances.
After this, the business can emerge from behind these defences, debt free, and ready to re-engage on far more favourable terms.
June 30th might seem a long way off but It’s less than three weeks.
This might be the day that your creditors have been marking down on their calendar for months so don’t assume that their better nature will automatically kick in as the day itself dawns.
R3 rightly points out that aggressive recovery action may go against the spirit of the times but while the letter of the law enjoys legal standing, the spirit has no such protections.
Relying on the better angels of people’s nature is not a strategy we’d ever advise but if you arrange a free initial consultation with us at your most convenient time, we’ll happily let you know what we would recommend in your situation.
We will explore all available options with you, including several you might not have considered, and work with you to implement the most efficient and effective strategy to make sure your company can make the rest of 2021 memorable for the right reasons.
Like the weather, insolvency statistics and news have been a bit of a law unto themselves in the last four weeks of Spring.
Even industry experts like ourselves know why figures aren’t as high as they would otherwise be but we’re still slightly surprised they remain so low officially.
One thing we do know for sure - Summer is going to bring a lot of change to the UK.
As well as hopefully improving weather, lockdown restrictions are due to finally end along with social distancing and physical trading restrictions.
Restrictions on winding up petitions, statutory demands and other creditor actions will also be ending so expect to see an increase in these areas.
But before we say a final goodbye to May and Spring 2021 - what are the interesting and important administration, business and insolvency stories that might have escaped your attention?
End of the affair for First Dates restaurant?
The restaurant group that owns The Refinery restaurant in Manchester where Channel 4’s First Dates has filmed since 2020 is entering a Company Voluntary Arrangement (CVA).
Drake and Morgan have 22 other sites across Manchester, Edinburgh and London although three, The Allegory and The Listing bars in London and The Refinery, would be expected to permanently close under the procedure.
Chief Executive and Founder Jillian MacLean said: “We started last year as a profitable and growing business and, in common with the rest of the hospitality industry, have been significantly affected by repeated lockdowns and tier restrictions.
The group hopes that the CVA will create some breathing space for the business to recover after “unprecedented and challenging” trading conditions.
National Training College closes without ever opening
The National College for Onshore Oil and Gas (NCOOG) issued a notice to dissolve last week, seven years after it was originally announced.
Former interim managing director Martin York said: “Following a government review into the industry, there was no requirement to proceed with the college.
“It’s provision was dependent upon the UK government granting permission for the onshore oil and gas industry to extract shale gas via rock fracturing in order to proceed.
“The government subsequently imposed a moratorium on fracking which contributed to the industry decision that it no longer had a UK skills shortage and as such there was no requirement to proceed with the National College Onshore Oil and Gas.”
The college had received over £400,000 in research funding since its inception but had not drawn down on any of the £5 million in capital funds available to it during this time.
A spokesperson for the Department of Education said “Given the change of landscape, the DfE and Department for Business, Energy and Industrial Strategy felt it was unlikely that the industry would be seeking to train apprentices at the rate which was originally anticipated in the short term and were content with the college’s proposals to dissolve its operations.”
This is the second national college to be dissolved this year as the National College for Advanced Transport and Infrastructure (NCATI) otherwise known as the national college for HS2 was closed this way and its operations transferred to a new department under the University of Birmingham.
In February 2020, the National College for Creative Industries (NCCI) dissolved itself and transferred its courses to South Essex College.
Doorstep lending no longer proves Provident
After 141 years, Provident Financial are closing their doorstep lending business with an approx. 2,100 positions at risk as a result.
The company hopes to sell the operation but could ultimately wind down the business which saw its losses increase to £75 million in 2020 up from £21 million the previous year.
The doorstep lending business was originally started in 1880 by Joshua Waddilove, who first had the idea of setting up a scheme for poor residents of Bradford to pay for clothing using vouchers that were then paid back in instalments.
The business has recently defended several mis-selling complaints from customers and claims management companies as well as facing a regulatory investigation from the Financial Conduct Authority into affordability checks for borrowers and several other issues.
Malcolm Le May, Provident’s Chief Executive, said: “In light of the changing industry and regulatory dynamics in the home credit sector, as well as shifting customer preferences, it is with deepest regret that we have decided to withdraw from the home credit market and we managed to either place the business into managed runoff or consider a disposal.”
Pandemic forces Sassoon Academy to make cuts
Sassoon Academy, one of the most recogniseable names in hairdressing, is to appoint administrators and pursue options including restructuring or a potential outright sale of the business.
The impact of Covid-19 was tremendous for the hair and beauty industry so the Sassoon Academy was forced to submit a notice to the High Court announcing that administrators would be appointed.
Haircare Limited is the parent company that operates both the Sassoon Salon and Academy brands and it is only the latter that is currently affected by the decision.
Vidal Sassoon opened his first salon on Bond Street in 1954 becoming world famous for his pioneering bob cut in the 1960s.
The academy was created to provide practical hairdresser education with the best prospects being able to transition to the salons when they completed their training.
The founder sold his interest in 1980 and the business was acquired by US hair care company Regis in the early 2000s.
McVities
Pladis, the parent company of McVities biscuits, announced that they would be closing their historic factory in Tollcross, Glasgow putting 468 positions at risk of redundancy.
The factory has been producing such household names as Digestives, Hobnobs and Rich Tea for over 100 years.
David Murray, Managing Director of Pladis, said: “We know this news will be difficult for our colleagues at Tollcross, our priority now is to provide them with the support they need during the consultation process.
“Pladis is home to some of Britain’s best loved brands which have been part of the fabric of our society for nearly 200 years.
“In order to protect them for generations to come, we must take steps to address excess capacity in the UK.
“This overcapacity limits our ability to make the right investments in future capabilities to meet the very big changes in our industry.”
Midlands Automobile engineer liquidated
Coventry based engineering company Penso, who previously worked with both Jaguar Land Rover and Mercedes models has gone into liquidation with 100 staff being made redundant as a result.
David Roche, Managing Director of Penso, said it was with great sadness that Penso was to be liquidated.
Former winners of the Midlands Manufacturer of the Year award as recently as 2015, Mr Roche continued: “At the beginning of last year, the impact of the global pandemic saw the immediate cessation of demand for all of the principal activities of the group.
“Automotive OEMs cancelled new vehicle developments, the aerospace industry cancelled all new aeroplane production and the demand for new taxis dropped to zero, as a result of lockdowns and travel restrictions.”
The company responded to the downturn by bringing to market the lightweight Pod vehicle for the home delivery market but the global semiconductor shortage that led to a slowdown in automotive manufacture was a further blow.
Mr Roche continued: “As a result of this, a number of OEMs stopped production which had a direct impact on the ability of the group to generate Pod sales. The additional financial requirements caused by the semiconductor shortage meant that significant additional cash would be required to secure our future.
“Therefore with no immediate alternative funding available, we have no option other than for the group to enter insolvency proceedings. This decision has not been taken lightly. The board of directors have tried our very best to keep the business trading and all alternatives to liquidating the business had been taken into great consideration.”
No whisky galore for Alexander Inglis
One of the UK’s leading grain suppliers, Alexander Inglis and Son, has entered administration.
The business has 40 employees across five grain stores in Scotland and a regular turnover above £100 million supplying essential grain to the whisky and distilling industries across the UK and beyond.
The 71 year old business also supplied cereal, barley seed and fertiliser but said that they had suffered from weaker trading in recent months following a poor harvest in 2020 and a contraction of demand caused by the pandemic.
A statement from the board of directors said: “The board determined that the best course of action was to wind the business down to maximise value to creditors.”
This will involve marketing the existing grain stores, plant and equipment for sale along with transferring to stock held in stores.
Amanda Wakeley
Luxury fashion brand Amanda Wakeley, best known for bridal and occasion wear, has announced that it is entering administration.
The company was able to continue trading during the pandemic through its online store despite its flagship Mayfair store and other concessions being closed throughout lockdown.
Demand for wedding and online wear collapsed in the previous 12 months as events were mainly cancelled due to various restrictions.
The business sought additional investment but was unable to secure any appointed administrators to proceed with marketing the business’s assets for sale.
Founder and Creative Director Amanda Wakeley who founded the brand in 1990 said: “During the pre-administration phase, the company’s staff worked tirelessly with us to maximise sales and mitigate the impact of insolvency on the company’s creditors.”
Currys returns, many brands depart
Dixons Carphone have announced a rebrand that will see all of their disparate brands brought under the Currys banner.
All Currys PC World, Carphone Warehouse, Team Knowhow and Dixons Carphone stores in UK and Ireland will transition to Currys by October along with a relaunched website.
The overall name will change to Currys plc on the London Stockmarket after the AGM in September.
Alex Baldock, Chief Executive of Dixons Carphone, said: “The rebrand is a “no-brainer”.
“It’s the best of the old and the best of the new. Since Henry Curry first started helping everyone enjoy the amazing technology of his day - the bicycle - in 1884, Currys has been the best-known and most trusted brand in tech.
“We’ve worked hard to become one joined-up business and becoming Currys reflects and accelerates that. The move will make it easier for customers, who can turn to Currys for all their tech needs.”
There will be no store closures or redundancies as a result of the name change and rebrand although the business had already announced plans to close their 35 Dixons Travel airport stores.
This is in addition to closing their 531 standalone Carphone Warehouse stores in 2020 although they kept branded concessions within larger stores.
If I close my company - can I still be pursued for an outstanding bounce back loan?
While personally it might feel like we’re at the cusp of a big change - in society and behaviour - what if professionally your business is stuck?
Or you can’t see a way for your company to be agile enough to take advantage of the coming wave of freedoms and spending that will accompany it?
Get in touch with us today before you spend another moment worrying.
We offer a free, initial consultation for any business owner or director who can’t see the way forward or isn’t sure what their next move should be.
Once we get a better idea of your situation, one of our expert advisors will be able to narrow down your options and help you focus on what you can and should be able to achieve.
So it’s natural to expect some spluttering and stalling before an engine recovers its temperature and rhythm to start firing on all cylinders again.
The parallels and similarities with the UK’s economic engine and machinery struck us when we saw the official registered company insolvency statistics for April 2021 released by The Insolvency Service.
The total number of company insolvencies for England and Wales last month was 925.
This is a slight reduction on the 992 recorded in March and is 23% lower that the 1,199 recorded in April last year and 35% down on the 1,429 reached in April 2019.
Despite lots of headlines about a “return to normal” we are still experiencing extraordinary times from a statistical viewpoint.
The numbers of registered company insolvencies have reached historic lows since the start of the year of lockdowns, and still remain significantly subdued.
The 925 company insolvencies in England and Wales consisted of 819 creditor voluntary liquidations (CVLs), 26 compulsory liquidations, 75 administrations and 5 company voluntary arrangements (CVAs).
In comparison to the data for the same month from the previous two years, we see how depressed the numbers are right now.
Additionally, there were 38 company insolvencies in Scotland (made up of 9 compulsory liquidations, 28 CVLs and one administration) which was down 17% year on year and 63% lower than April 2019.
There were also 5 company insolvencies registered in Northern Ireland (made up of 3 compulsory liquidations and two CVLs). This is down two from last month and while 67% higher than a year ago, is 74% lower than April 2019 - but while dealing with such relatively low totals, any change could produce high percentages.
The overall UK total of company insolvencies for April 2021 is 968. An overall reduction of 74 on last month’s figure.
As statutory demands and winding-up petitions are still suspended until the end of June 2021 and with other measures such as the CJRS furlough remaining until September, the figures are being artificially depressed from levels we would expect to see given similar trading and external economic conditions.
Christina Fitzgerald, Vice President of R3, the insolvency and restructuring trade body said: “The monthly fall in corporate insolvency numbers shown in the latest published figures has been driven by a drop in both Compulsory Liquidations and Creditors Voluntary Liquidations.
“We now have a year’s worth of pandemic insolvency figures, and it’s clear the Government's support measures have prevented a significant number of businesses from becoming casualties of the economic consequences of Covid-19.
“The big question is what will happen to insolvency numbers as we come out of the pandemic, but there are too many variables to say with much certainty about exactly what this will look like.
“Government has had a challenge on its hands in terms of managing the exit from lockdown and the withdrawal of its financial support measures. How it handles this will help determine if there is a sharp spike of business failures or simply a smoother return to pre-pandemic insolvency levels.
“Company directors need to make the most of the time they have left before these support measures finish to plan for the future, and work out how they will manage without state support.
“The situation is still tough for many British businesses. While spending is increasing, it’s still below 2019 levels and consumer confidence remains low, although people are more optimistic about their finances over the next 12 months.
“The easing of the lockdown in the middle of April, and the further lessening of restrictions recently will be a boost to many businesses. That said, a large number are still having to work in a way that complies with Covid guidelines, adding cost and complication to their operations.
“The temporary ban on winding-up petitions is due to finish at the end of June, and other Government support schemes are due to be withdrawn in the next few months, which will clearly increase pressure on financially struggling firms.”
You might be forgiven for experiencing a sensation of deja vu when you look at the latest official company insolvency statistics.
They appear to constantly be at historic lows thanks to a mix of economic support, legal restrictions and increasing customer demand.
Sadly none of these factors are guaranteed to last for many more months this year. Two are almost certain to be withdrawn and demand can fluctuate due to various factors even at the best of times, never mind during reopening from a worldwide pandemic lockdown.
The one piece of advice we have consistently offered to directors and business owners during this fairly static period becomes more pertinent and imperative with every passing week - get some professional advice!
This time can be valuable to plan the next steps in your business’s recovery strategy or to consider moving in different directions.
We continue to offer a free initial consultation where we can learn about what challenges your company is facing and offer you actionable choices that you can make, often immediately, to bring you closer to your end goal.
Because when the economic winds do change, you’ll be surprised how strong they’ll become and how quickly a April shower can turn into an actual storm.
The directors and owners of the business will have been working 24/7 to get everything compliant and ready to welcome people in a safe and secure setting.
They will have been bringing back staff or hiring new workers to meet anticipated demand, ordering in supplies and getting everything ready for what they hope will be an excellent but belated start to the trading year.
The issue of wrongful trading seems a million miles away at the moment but it’s worth taking five minutes to catch up on what it means for a business and directors who do fall foul of the law including what they can do now to avoid it.
Voluntary liquidation is an efficient way to close a business
What is wrongful trading?
This is where directors knowingly allow the business to remain open and keep trading while it’s insolvent with little or no prospect of it being able to repay creditors. It can also be known as trading while insolvent.
Before the year of lockdowns, there were quite severe penalties for directors of companies that were guilty of wrongful trading. These included being made personally liable for debts the business incurred during the period as well as being disqualified as a director for a period.
This was under normal business circumstances which the past 12 months have been anything but. As a result, the government introduced some changes to the rules around wrongful trading as part of the Corporate Insolvency and Governance Bill 2020.
One of these was the suspension of wrongful trading rules. The suspension has been extended and will currently end on June 30.
The idea being that with the massive uncertainty faced by businesses, directors could find themselves technically being guilty of wrongful trading while doing their best to keep their company active.
Other currently suspended rules include the ability of creditors to issue statutory demands and winding up petitions, all designed to give directors the maximum flexibility to make sure they had companies that could reopen when allowed.
The easiest way to tell if a company could be considered to be wrongfully trading is if they don’t pay their debts as they fall due or if their liabilities exceed their total assets.
Fraudulent trading
Wrongful trading is a civil offence and could be defended depending on the circumstances but fraudulent trading is different and is an actual criminal offence.
To be guilty of fraudulent trading, it has to be proved that directors willingly and knowingly carried on business affairs with no intent to pay their debts. Examples can include taking customers money while preparing to put the company into liquidation and not delivering goods or services that have already been paid for.
Any insolvency practitioner investigating the actions of directors would be legally obliged to report any evidence of fraudulent trading to the authorities.
When the rule changes were announced, Chris Horner, Insolvency Director with Business Rescue Expert said: “It’s important for directors to understand that they haven’t been handed a “get out of jail free” card.
“It’s good news that companies in financial difficulty are being offered support but if the underlying causes of their issues dont change then they will still need professional help sooner rather than later.”
There are some practical steps businesses can take if they fear they could be in danger of wrongful trading.
These include not taking delivery of goods they know or suspect they won’t be able to pay for; not dispose of any assets without specialist advice and don’t make any preferential payments to creditors at this time - especially friends or family.
The best and easiest step they could take is to contact us and get specific advice as soon as possible.
We will be able to advise them of their options depending on their situation and how to make changes that could alleviate their concerns.
Alternatively, if the company has reached the end of its life cycle then directors should look at their options at closing down including methods of voluntary liquidation
No matter what they ultimately decide, getting advice and acting on it while they still have agency, is always the best, first choice.
