The Office of National Statistics (ONS) said last week that 2/3 of businesses across all industries were at risk of insolvency last month with 4 out of 10 companies surviving on less than 6 months cash reserves.
These worrying figures arise from the latest Business Impact of Coronavirus Survey (BICS) and unsurprisingly found that accommodation and food service industries had the highest risk of insolvency.
A further report by insolvency firm Begbies Traynor found that up to half a million UK businesses were in “significant financial distress” and at risk of insolvency due to the impact of the virus.
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 laws banning trading while insolvent, together with the further government instigated lockdown that we have just entered can be expected to result in business insolvencies and consequent redundancies. In particular, this may be the tipping point that pushes many hospitality businesses into insolvency.
Our advice to businesses and individuals facing financial difficulties continues to be to seek advice early. If you recognise the early signs and speak to your solicitor, your accountant, banks/lenders and your usual professional advisors, a plan of action can be put in place for yourself or your company to minimise any adverse circumstances and assist you going forward. Insolvency should remain a last resort, and where possible, you should explore all of the options available to you with a professional.
If you have any financial or debt concerns, please contact me for confidential advice about your best options. Call 0845 287 0939 or contact me by email: Mark.Skinner@farleys.com.