An insight into the current work of our Insolvency Practitioners - What is really happening out there?

Published: 13/08/2020 By Jane Price

Everyday we are faced with more headlines about difficulties on the high street and the hospitality sector. However, what else is happening beyond these headlines and amongst the smaller businesses that do not get much coverage on social media and in the papers?

The first few months of lockdown
Across most sectors including insolvency, the effect of lockdown resulted in effectively a standstill of activity as everyone took stock of what was happening and waited to understand the implications. It has taken several months for everyone to understand how the government initiatives would work and try to predict how this would affect future prospects. Even at this stage the outlook remains uncertain as the lockdown measures ease.

In the first few months, we received enquiries but relatively few instructions and this is reflected in the drop in insolvency appointments across the sector. This was inevitably caused by the government support including the loan scheme, furlough, deferment of VAT and the stop on statutory demands and winding-up petitions.

An increase in enquiries?
However, from mid-July we have seen an increase in instructions from clients to seek advice and start planning ahead whether that be to help navigate through the difficulties in the future or alternatively enter into a formal insolvency procedure. The trigger for this is amongst various factors but commonly includes the following:

  • Furlough scheme changes meaning that the employer will start contributing to employee costs;
  • The expected end of protection from statutory demands and winding-up petitions at the end of September 2020;
  • The realisation that there is little prospect of meeting the deferred VAT liabilities;
  • Being unable to access CBILs through high street banks and other lenders being too expensive;
  • The realisation that the existing businesses has existing burdens that it is unlikely to be able to carry going forward without initiating an insolvency process. Regularly this will include leases for underperforming premises or historic debts.

Case studies - who are we helping?

Public houses, bars and nightclubs
We are currently advising several businesses with multiple premises in order to consider options for restructuring the groups. As with many businesses in these sector groups they will have various premises performing at different levels. Whilst premises have re-opened it remains to be seen how the various premises will perform going forward and for many businesses they have decided that it is not cost effective to re-open certain premises. We are advising these groups on how to plan going forward and what needs to be done to provide a streamlined and profitable business for the future.

Cafes and restaurants
In a similar vein to the first category these businesses rely upon a physical presence and we are advising various businesses on how they can operate going forward to enable them to be viable.
Film and entertainment
The lockdown resulted with a slowdown in activity in film production and related industries. In the meantime, these businesses continue to carry the weight of rent and employees so looking at future options has been vital.

Property and construction
For those businesses dependent upon the construction of properties and the flow of funds involved with the sale and purchase it has been a torrid few months. We are looking at how these businesses can survive as the property market re-opens and how to manage their existing debt.

Suppliers into travel, retail and hospitality
It is easy to focus on the big retail, travel and hospitality businesses and too easily you can lose sight of the chain reaction on smaller businesses who survive on supplying into these businesses. Many of these have sought support to understand how they can manage their stakeholders whilst their trading begins to return to normal.

What are we advising?
As you would expect there is no “one size fits all” solution and we adapt our advice depending upon the client’s need. At present this consists of ongoing advice or looking at Company Voluntary Arrangements and Administrations. In cases where there is little prospect of rescuing anything from a business then we would look at a Creditors’ Voluntary Liquidation. In addition to these options we are now provided with options such as the new moratorium or restructuring plan which will no doubt get more use as time passes.

For many businesses now is a good time to get advice before the current support starts to fall away. Many will not need an insolvency process but simply understanding the options can give more clarity and form the strategy going forward.

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