With Government restrictions on key debt enforcement actions due to run out at the end of this month, businesses in the south and Thames Valley should seize the initiative and start conversations with their creditors over arrears built up during the pandemic.
That’s the view of Garry Lee, the Southern and Thames Valley chair of insolvency and restructuring trade body R3, who has expressed concerns that any rush by creditors to recover what they are owed too quickly might force the companies that owe them money out of business.
Lee, who is an associate director in the recovery and restructuring services department at accountancy firm Smith & Williamson’s Southampton office, believes that constructive and honest conversations between groups such as landlords and tenants, suppliers and customers, and businesses and HMRC will be vital both to businesses’ prospects of continuing to trade and the wider economic recovery.
He said: “Some businesses have built up debt over the pandemic for very understandable reasons, so it will be better for them to have productive and frank discussions with those they owe money to about the best way to proceed. Creditors who stubbornly insist on imposing unrealistic debt repayment plans may well find that this is far from the best way to recover their funds, and that a little cooperation will go a long way towards securing longer-term repayments.
“Aggressive action to recover debt, while shortly to be allowed once more, would go against the spirit of everything that the Government has done to keep many businesses afloat, and to protect the jobs that they support. We would hope creditors will realise that compromise and reasonableness are a better route forward. After coming through so much, it would be a terrible waste to see firms in the south and Thames Valley unnecessarily falling by the wayside.”
For example, the restrictions preventing landlords from evicting commercial tenants and stopping creditors of any kind issuing winding-up petitions under most circumstances are due to end on June 30.
The end of June is also the second Quarter Day of the year, when commercial tenants’ rents are due – meaning it is the last Quarter Day which will be covered by the eviction ban.
Lee added: “Even before the Government unilaterally stopped commercial evictions, many landlords were taking a pragmatic view of their tenants’ positions by recognising the unique situation that was evolving, and agreeing to defer – although, crucially, not cancel – rent payments.
“However, these landlords have still had their own responsibilities to meet over the past year and a bit, including mortgages, insurances, maintenance costs and utility bills, and they will be understandably eager to recover the money they’re owed. If the debtor fails to do what’s asked of them, the creditor will be perfectly within their rights to take enforcement actions, even if difficult trading conditions means that there’s no way they can repay along pre-pandemic timelines.”
Finance industry figures showed that UK consumer spending rose above pre-pandemic levels in April for the first time this year, while consumer confidence levels remain below 2019’s levels, although they are slowly beginning to improve.
Lee added: “Despite all the support measures that have been put in place, a wide range of firms in the south and Thames Valley have still barely been able to keep their heads above water. The clear concern now is that too swift a return to these businesses having to meet their full cost liabilities, in an economy that’s not yet fully functional, will be enough to push many of them under.
“Any business owners who are concerned about the state of their finances need to seek advice from a qualified and regulated adviser as early as they can, so they can give themselves access to the widest possible range of solutions, and can find the right one for their particular situation.”