Posted: 24 Feb, 2021
On Monday Boris Johnson revealed his ‘roadmap’ out of lockdown. For some it is too slow and for others it is too fast but for businesses it does at least provide some clarity. Now, we await 3rd March when the Chancellor will deliver details of the Spring Budget and businesses across all sectors will be hoping for an extension of support measures beyond their planned end dates. If the Government’s plan is followed, all restrictions will be lifted by 21st June, but many businesses need further support to survive until and beyond this date.
For several months the Government has been under pressure to announce an extension to support and the Treasury has already confirmed that the Budget will “set out the next phase of the plan to tackle the virus and protect jobs”. At present, the business rates holiday is due to expire at the end of March and the furlough scheme at the end of April.
However, the latest report from the Institute for Public Policy Research (IPPR) says that 600,000 businesses are at risk of collapse if the business support schemes end abruptly in March and April as currently planned. Small businesses are most at risk with the report saying that 40% of businesses with fewer than 50 employees have less than three months of remaining cash reserves. Businesses are haemorrhaging cash and there is a real concern that many won’t survive until summer when life is expected to look a little more like normal.
There is already some hope that further support will be given. It’s expected that the Chancellor will use the Budget to announce an extension to the furlough scheme into the summer before being phased out. He is also said to be preparing to prolong a business rates holiday for the retail, hospitality and leisure sectors.
Commenting on what he would like to see in the Budget TMA UK Director, Andrew Pepper, said:
“Key to me is that unless you continue to support the companies that you have already lent to, your earlier lend will be in vain and you might as well have not lent at the start.”
“The only way to maximise debt repayments and the survival of companies is if directors believe it is in their interest to continue. Hence extensions, further sums and some form of equity/long repayment dates are needed. Otherwise you pre-pack and start again with a clear balance sheet...or just stop and start again, but again with a clean balance sheet. I believe the vast majority of people will repay their debts – but not at any price. There is a balance and the Government needs to find it.”
Whether the government will continue to prioritise business support over the need to address national debt will be revealed on Wednesday. The latest figures from the Office for National Statistics show that government borrowing for this financial year has reached £270.6bn – £222bn more that the same period last year. But while Rishi Sunak is expected to outline the first steps towards addressing the national debt, it’s hoped these steps will be tentative. The general consensus amongst economists and businesses seems to be that rebuilding public finances must wait until recovery is well underway.
TMA UK is part of TMA, a global organisation that represents the interests of turnaround professionals as its members who have the skills needed to assist in these unprecedented times. If you need assistance, please contact our helpline on 0844 804 0116
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