The Office for National Statistics recently published a report indicating that 64% of UK businesses were at serious risk of insolvency. This figure covers all industries however the latest Business Impact of Coronavirus Survey outlined that the accommodation and food service industry had the highest proportion of businesses facing insolvency at 17%.
For businesses continuing to trade the statistics from the ONS for the period 5 October to 18 October 2020 revealed that 42% have cash reserves which will be depleted in less than 6 months and a further 3% had already run out.
In September 2020 retail sales volume was beginning to show signs of healthy recovery, up 5.5% from February 2020 which was before the COVID-19 restrictions began. Fuel was the only sector (out of the main four sectors fuel, non-food, food, and non-store retailing) that had not exceeded the February 2020 Levels. In the wake of a new national lockdown, we will once again see businesses closing their doors and the implications of this are untold.
Begbies Traynor recently published Red Flag Alert research recording that 557,000 businesses are in ‘significant distress’ which is the largest increase between quarters since 2017 and a 6% increase in the last 3 months.
Temporary breathing space has been afforded by changes to the UK insolvency legislation which has limited the issue of winding up petitions and also implemented a number of schemes to assist companies financially.
There is a real danger that in some cases the restrictions on insolvency procedures and government support packages are only delaying an inevitable surge in personal and corporate insolvencies. The Insolvency Service reports that in August 2020, corporate insolvencies were down 43% relative to August 2019. The restrictions on winding up petitions and the reduced capacity of the Court to hear cases means that the reduction in the number of insolvencies is less likely an indicator of calm waters and more likely the harbinger of the tidal wave to come.
As the Courts battle to increase their capacity and the twice extended relief from creditor action draws to a close it is important that you take professional advice where you are unsure about the viability of your business. At Brabners, our dedicated insolvency team can assist you with issues your business is facing - be it the fear of impetuous creditors waiting for the green light or general advice on how to weather the coming storm.
