Now, as we come out of restrictions, directors and other stakeholders will need to know exactly how their companies are performing, keeping an eagle eye on whether their business is sufficiently funded (either cashflow or capital) to meet both the opportunities and the challenges of the next six to 12 months.
A few numbers are enough to indicate the effect the pandemic has had on the economy; in particular in relation to some of the government’s support schemes. As at the end of March 2021, the situation was:
A recent BBC report suggested about 2.2m people (or 6.5% of all workers) could be unemployed by the end of the year, according to the Office for Budget Responsibility (OBR).
Before the pandemic, less than 4% of the economically active people aged over 16 were unemployed. Whilst this rose to 5.1% at the height of the pandemic, this has since reduced and continues to do so. However, anecdotal evidence suggests that will increase after the withdrawal of the furlough scheme.
The furlough scheme has protected more than 11m jobs since the pandemic began and as at January 2021, 4.7m workers remained on furlough. However, since the pandemic began, 693,000 payroll jobs have disappeared including 368,000 in hotels, restaurants and pubs and 120,000 in shops.
Finally, nearly two thirds of the fall in number of employees has been among the under 25s.
Of the various business relief schemes available, by late March 2021, the following had been used, according to the British Business Bank
|Product||Number (as at 25 March 2021)||Total value (£)|
|Bounce Back Loans||1,531,095||£46.5 bn|
|Future fund||1,236||£1.2 bn|
The level of debt being borne by SMEs, especially, has promoted concern that it could be unsustainable.
The Institute for Government considers that Covid-19 will have cost the public finances £394bn in 2020/2021.
Corporate insolvencies have been lower during the last financial year compared to the year before; in particular, administrations (and receiverships) between January to June 2021 were down to 301 from 655 in the same period in 2020 and 686 in the same period for 2019. However, more recently, the number of CVLs has risen sharply, by 19% and 62% in May and June 2021 compared to the same period in 2020.
Whilst corporate insolvencies for the year 2020/2021 were lower than the previous 12 months, the construction sector continues to lead the field. Of those insolvencies within the last financial year, there have been 129,748 overdrawn director’s loan accounts, compared to 61,983 in the previous year with an average amount outstanding of £78,482.
On a more positive note, and following a recently concluded survey by R3, in 2019 restructuring and insolvency professionals rescued 297,000 jobs, saved 7,200 businesses and returned a combined £1.82bn to creditors in corporate and personal insolvency cases.
The next six to 12 months is going to be a challenging time for a number of businesses and sectors who will have to cope with the combined effects of lockdown AND the country easing itself out of lockdown.
Government-backed loans will begin to become repayable, whilst the various suspensions on enforcement processes will come to an end. This includes forfeiture and possession proceedings by landlords, the use of statutory demands and winding-up petitions and the introduction of ipso facto clauses – preventing suppliers of goods and services from terminating the agreement with a company entering an insolvency process.