A report by the Office for National Statistics (ONS) reported recently that 64% of businesses across all industries were at risk of insolvency last month, with 43% of companies having less than six months cash reserves. Here Cowgills’Director and Insolvency Practitioner Ben Cowgill provides further detail.
The latest Business Impact of Coronavirus Survey (BICS) from the ONS unsurprisingly found that the accommodation and food service industries and the administrative and business support industries had the highest percentages of companies at severe risk of insolvency, at 17% and 9% respectively.
The problem is compounded as, early in October, the Business Secretary, Alok Sharma reinstated rules that force directors to stop trading if they believe their business is insolvent. (These rules were lifted in March to allow businesses to continue trading, often using large government loans).
The Government’s decision to lift protections that shielded directors from being criticised for trading while insolvent, together with the further government instigated lockdown that we recently entered, can be expected to result in business insolvencies and consequent redundancies. This may be the tipping point that pushes many hospitality related businesses into insolvency.
The impact of such business closures is far more extensive than the immediate issues seen on the high street – suppliers to those businesses are also hit as they feel the ripple effect.
Prior to the most recent restrictions, businesses that were previously teetering felt able to breathe and take stock of their situation as creditor pressure was minimised and cash injections made available.
Ben comments: “With the renewed restrictions and uncertainty, we are understandably receiving more requests for advice from these businesses and those feeling the pinch further down the chain.
“There could be a flood of insolvencies once the courts are able to get back to capacity, particularly when furlough ends.
“My advice to any business owner experiencing financial distress would be to seek advice as early as you possibly can as it increases the options available.
“Our primary objective is to get to know your business quickly, understand the issues, and to deliver a plan with a clear focus on assisting the business to continue, preserving employment for staff wherever possible.”
If you would like to get in touch with Ben, contact him directly at ben.cowgill@cowgills.co.uk
Disclaimer
The information was correct at time of publishing but may now be out of date.
