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The impact of tier 3 closures on bars and restaurants

Tier 3 restrictions could result in permanent closure for 20% of bars and restaurants in affected areas, with the impact also felt throughout the supply chain.

Here Cowgills’ Director and Insolvency Practitioner Ben Cowgill explains more.

The restrictions recently put in place throughout most of the North of England risk putting over 3,500 bars and restaurants out of business, according to recent insolvency data.

Businesses in this sector are facing the possibility of permanent closure as a result of the limited ability to trade, following further government intervention.

Liverpool became the first UK city to be classed as ‘very high risk’ in October, which was soon followed by further extensions to include Lancashire and then Greater Manchester, despite efforts from the Mayor Andy Burnham and leading local leaders.  Warrington has now also been told that it too was to enter the country’s highest restriction levels.

There has been a continued trend of an increase in County Court Judgements (CCJs) filed against these companies for missed payments.

Deterioration in financial performance has resulted in increases in unpaid invoices and bad debts throughout the supply chain.

The impact of such business closures is far more extensive than the immediate issues seen on the high street in that particular region – suppliers are hit throughout the country and beyond as the ripple effect is felt.

Despite the local furlough scheme and cash grants, the feedback from business owners in this sector is that they are drowning. Because of the lack of footfall. Without a return to some form of normality soon, it is difficult to see light at the end of the tunnel.

Ben commented: “Historically we have advised a number of businesses in the hospitality sector, particularly those in city centres, in the period after Christmas trade has concluded.

“It’s the norm in such a competitive market with tight bottom line margins”.

“This year has obviously panned out very differently. The usual influx of advice requirements that came from business owners in this sector in January and February was largely put on hold once Covid restrictions and reliefs were put in place.

“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. They no longer felt the urgency to consider a restructure or closure.

“However, with the renewed restrictions and uncertainly, we are understandably receiving more requests for advice again from these businesses and those feeling the pinch further down the chain.

“The sooner footfall is allowed to return to normal, the better from an economic point of view. In the meantime, we will be here to assist businesses in the sector as much as we can.

“My advice to any business owner experiencing financial distress would be to seek advice as early as you possibly can, it increases the options available.

“Our primary objective is to get under the skin of the business quickly, understand the issues, and deliver a plan with a clear focus on business continuation wherever possible.”

If you would like to speak to Ben you can contact him directly ben.cowgills@cowgills.co.uk.

Disclaimer

The information was correct at time of publishing but may now be out of date.

Business Recovery
Posted by Ben Cowgill
30th October, 2020
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