Is the economic landscape changing? – Guest blog by Menzies LLP
In this week’s guest blog, the Menzies LLP Creditor Services team look at the changing economic landscape, alongside Small & Medium sized Businesses’ (“SMB”) debt statistics. What will happen as Government support reduces?
Economy continues to grow
The BBC recently reported that the economy grew by 0.8% in May 2021, which was the fourth consecutive month of growth, but it also flagged a slowdown of growth from April’s 2%. (Source: Office of National Statistics.)
Late payments on the up
A recent study from data held by QuickBooks has highlighted an increase of late payments in the SMB market. Statistics are showing almost nine out of ten businesses had an overdue invoice in May 2021, with an average debt being in the region of £20,000.
Current Government support
Restriction on winding up a company
At present, there is a restriction on companies being wound up in the Courts before 30 September 2021. Whilst this has been pushed back several times during the pandemic, 1 October 2021 may well see some of this debt recovered using this process (correct as at the date of publication).
The Furlough scheme is being reduced – again putting further cost strains on businesses.
· From 1 July 2021 – the Government will pay 70% and employers pay 10%.
· For August and September 2021 – the Government will pay 60% and employers 20%.
· It is not expected that the Furlough scheme will continue past 30 September 2021.
· Monthly cap at £2,500.
At present, there is a rent moratorium on commercial properties which has been recently extended to 25 March 2022.
This moratorium stops landlords from taking tenants with rent arrears to Court. The Government is urging landlords and tenants to resolve their dispute independently. If it cannot be resolved, then the parties will need to enter into a binding arbitration.
The arbitration matter is new legislation, still in its infancy, but it is expected to frustrate landlords, many of which have not received rent now for several months.
The director led Creditors’ Voluntary Liquidation process doubled in comparison to year on year figures but was also 11% higher than June 2019. This may be a sign of increased insolvencies or it may have been as a result of the delay of lifting the Covid restrictions to 19 July 2021.
Present insolvency numbers are low so the Government can certainly look back at the support mechanisms they have put in place to ensure the economy does not grind to a halt.
However, as there are shoots of hope returning back to some normality, if no further lockdown restrictions are imposed, the Government will be reluctant to extend these support schemes further.
Cashflows are straining as the world we once knew begins to open up, but if you seek support early enough, your business options are broader.
For further information on these topics, please contact Giuseppe Parla, Senior Business Recovery Manager and Qualified Insolvency Practitioner, at email@example.com or call 0207 465 1919.
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