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Will the Autumn Bring More Problems for Businesses?

Even though restrictions have been lifted for a while and much of society has been trying to get back to normal (as best it can), support for businesses has still been ongoing. However, the 1 October sees the lifting of another form of protection for Limited Companies, with the suspension of the Winding Up moratorium coming to an end. Speaking to our debt collection contacts, there are a large number of suppliers waiting for the protection to end so that they can issue a winding up petition. Could this be the last straw for businesses that are struggling with cash flow?

According to a recent report by insolvency specialists, the number of businesses who are facing severe financial stress has gone up from about 500,000 to 650,000 over the last year. This may not come as a surprise considering the massive impact this pandemic has had on our economy. But it’s actually a strange environment. Some businesses are booming and have in fact benefited from the situation, others still remain in a zombie like state, just about surviving. Then there are those that have suffered greatly, or already failed.

Clearly many in the leisure and hospitality industries have welcomed the end of lockdown. Restaurant managers are reporting a surge in customer demand, which is probably most welcome. This is likely to be explained by a pent up need for people to go out and have a good time. But other sectors aren’t so lucky, and perhaps because of the paradigm shift in working practices caused by Covid, many of them will never get back to where they were pre-pandemic.

Financial Support
For many companies, borrowing money last year was a necessity. With such things as the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan scheme, there were plenty of opportunities for businesses to get financial support. But a year has now passed since the first loans were advanced, and companies are having to pay back what they borrowed, and more importantly with inevitable interest as the initial interest free period comes to an end. This is clearly going to have a further impact on cashflow, and for many companies who were already struggling to get by, this could mean they now face insolvency.

With more changes yet to come as we approach Autumn, such as the lifting of the suspension of the Winding Up moratorium, it could mean that distressed companies face even more problems. Although the lifting of this suspension is being phased out, with interim measures in place until 31 March 2022, it will still leave many companies vulnerable.

Applications for a County Court Judgment (CCJ) have increased almost twofold compared with the corresponding quarter of 2020 – with over 14,400 CCJs being granted from April to June 2021. This signals a real danger and it seems inevitable that there will be a tsunami of court actions when the rules change on 1 October.

The Autumn
As we leave the summer behind and all the support and restrictions disappear, we will have to wait to see what this means. We certainly don’t need yet another blow to our fragile economy, but many fear that the Autumn is going to be a very tricky trading period for thousands of businesses.

We also still don’t know what winter will bring with regards to the pandemic. A time when colds and flu are traditionally passed around, will this mean we face more restrictions that could further cause problems for businesses? The simple fact is that none of us can predict what is to come during the colder months. We can only hope that it will be much better than last year.

Regardless of what government support may be coming to an end, if businesses are in distress, then they can still get support from an Insolvency Practitioner such as BLB Advisory. Speaking to an Insolvency Practitioner does not necessarily mean your company faces closure. In fact, more often than not we manage to save companies. But the earlier you reach out and ask for guidance, the better chance of moving forward you have.

If you’re concerned about your business finances, please do get in touch. We’d be happy to discuss your situation and offer advice that might help.