Challenges to Businesses as we come out of the Pandemic

It is a fact that every single business has been challenged by trading during the pandemic and there remain considerable challenges as we return to ‘normality’. Many businesses have, of course, successfully adapted to changing trading conditions, demonstrating incredible resourcefulness, and we have seen illustrations of that throughout all sectors of our client base.

The unprecedented support provided in the form of the furlough scheme, business rates support, deferment of HMRC liabilities, CBILS and ‘Bounce Back’ loans have undoubtedly ensured that many businesses are in a position now to take advantage of the easing of lockdown restrictions.  Some predictions are that during the first half of 2022 the economy will be back to pre-Covid levels of activity and this will be driven by pent-up consumer demand as life begins to return to normality.

However, it is also the case that many businesses will be emerging from lock down and entering the new trading period with additional debt burdens and other challenges. The deferment of liability that was available and having taken on CBILS and Bounce Back loans will mean that many businesses are carrying additional debt and they may also be facing a changed market that has developed throughout lockdown.

It will therefore be important to try and understand the financial circumstances of the businesses that you are going to be trading with as we emerge from lockdown and the measures of support are removed. Throughout lockdown there has, to all intents and purposes, been a stay in the ability of businesses to issue winding up petitions and this has now been extended until 30 June 2021 so there may be a flurry of court activity as soon as the restriction is removed.

The position that HMRC takes will also be interesting.  Currently HMRC are providing a lot of assistance to businesses and our experience is that Time to Pay arrangements are fairly readily accessible over as much as a 24 month period, representing a significant shift from the pre-Covid position. We have even heard of a 5 year agreement being reached.

But combine that with the fact that there is an enormous government debt to repay and that HMRC have regained preferential status as a creditor in insolvency proceedings, I cannot see that HMRC’s compliant position will last for too long.