Was 1st October 2021 a game-changer for business?
Comments from Stephen Wainwright, Partner at Poppleton & Appleby.
The Institute of Directors reported at the start of the month that their members are reporting confidence for the future, however, the financial outlook has declined back to levels not seen since the height of the third lockdown in March 2021.
At the same time, several Government support schemes are being wound down, which will cause many business leaders great worry and concern going forward.
The Furlough scheme ended on the 30th September 2021
Since its introduction in March 2020, over 11.6 million employees have been supported by the coronavirus job retention scheme, enabling businesses to retain highly skilled employees who may otherwise have been made redundant.
This has come at the cost of circa £70 billion or approximately 20% of government expenditure on support for businesses. The costs could have been significantly higher had the financial support measure not been put in place as it has saved not only the employees’ jobs but also many businesses that might otherwise have faced insolvency.
As of September 2021, data suggests that circa 1.1 million people remained on furlough
Affected by coronavirus, several industries now face real concerns on how to resolve the predicament they find themselves in, with the travel industry receiving the most brutal hit.
A recent survey suggests that 30% of staff would return to their everyday pre-pandemic working life. Approximately 60% would face temporarily reduced hours and reduced pay, and as many as 12% of the workforce would be redundant.
While these are worrying numbers, ABTA has reported that members had started to report a marked increase in late bookings for Christmas, but people were still holding off booking for next summer. This makes it hard for businesses in the travel industry to plan.
The hospitality sector has been hit severely by multiple lockdowns. It has been well reported that many staff have left the industry, leaving many vacancies that are not being filled now that the industry has reopened.
Consumers are clamouring to book a table at their favourite restaurant or pub after being unable to do so over the last 18 months. This has led to many businesses turning down bookings or even remaining closed because of the chronic shortage of staff, which is when they least could afford to do so.
To compound matters from 1st October, the temporary VAT reduction ends; the VAT rate will revert to 20% from the reduced rate of 5% introduced In July 2020.
Winding up petitions and enforcement change 30th September
The restrictions on issuing Winding Up Petitions and enforcement will change with effect from 30th September 2021. You can issue a winding-up petition against a company that has failed to satisfy a statutory demand, subject to the following criteria:
- The level of outstanding debt must be at least £10,000
- The creditor must demonstrate that a formal 21 day notice period has been observed
- The debt cannot be for commercial rent
These measures will be reviewed in March 2022.
These fundamental changes will have a major impact on businesses
The above changes will significantly affect those struggling and relying heavily on government measures. We are now facing a new chapter, and with many of the stimulus’s and protections previously put in place no longer in force, we have moved back to pre-pandemic regulation in many ways.
It is more important than ever to obtain professional advice from a regulated insolvency service and business turnaround specialist.
Unlike many, our partners and key management will always triage clients issues and listen to any concerns a business owner has before considering what is best for them and all stakeholders.
We aim to save all or part of a business through turnaround or restructuring rather than immediately looking at formal insolvency.
Each partner has at least 20 years of experience in the business recovery sector, and all are licensed. Two partners hold significant positions within the IPA and R3, our leading associations within the business turnaround and insolvency industry.
The key to saving any business with financial problems is seeking professional advice from a regulated business turnaround specialist as early as possible. Get in touch today for your FREE initial meeting within 48 hours.