A rise in corporate insolvencies in figures published this week has triggered a new warning for businesses in the south and Thames Valley. R3, the trade body for restructuring and insolvency professionals, is urging firms to ensure that they are prepared for the expected phasing out of government covid support.
The comments come following publication of the May 2021 corporate and individual insolvency statistics for England and Wales. They show:
Garry Lee, chair of R3’s Southern and Thames Valley region, said: “Times remain tough for businesses. Government support has held off rather than halted the economic damage of the pandemic, preventing a serious rise in insolvency levels. Many business owners in the south and Thames Valley are now having to look ahead to how they’ll cope when these measures are withdrawn in the weeks and months ahead, and if they aren’t, they should seriously start to consider how they may be affected.”
Lee, who is an associate director in the recovery and restructuring services department at accountancy firm Smith & Williamson’s Southampton office, added: “Many businesses are more confident about their ability to grow but many are still concerned about the continued effect of covid restrictions. There’s still a lot of ground to make up to fully recover from the unprecedented economic contraction in April 2021. Consumer spending has increased, but it’s still below 2019 levels, and while consumer confidence is improving, people are still worried about the future of the economy.”
The Coronavirus Job Retention Scheme is due to cease at the end of September.
According to the House of Commons Library, by midnight on 14 May 2021, 11.5 million employee jobs had been furloughed, at a cost of £64 billion.
Furthermore, employers will be required to contribute, 10% in relation to July and August 2021 and 20% in relation to September 2021, to workers’ furlough pay for the hours they do not work while also remaining responsible for the associated employer’s national insurance and pension contributions.
This, combined with the government’s decision to extend existing lockdown measures until at least 19th July, could have a significant impact on businesses that were already facing difficult times.
Lee said: “When it comes to personal insolvencies, government and private sector support has aided many people – with the furlough scheme protecting millions of jobs. However, those who have been furloughed may have struggled to cope with any reduction in salary, as well as the potential uncertainty around their employment. We hope the new Debt Respite Scheme, which gives people in debt a breathing space free from creditor pressure in which to seek help, will be taken up by more and more people, after its launch in early May.
“We know it can be tough to talk about financial concerns – whether they’re personal or business – but doing so can make a huge difference. Anyone concerned about their financial situation should seek advice from a qualified and regulated advisor as soon as possible, so they can understand what options are available to them and so they have the most time to decide on an appropriate next step.”