UK Prepares Itself For A Wave of Company Insolvencies

September 21, 2020 / Business News

Many industries have been hit hard during the COVID-19 pandemic, suffering a number of company failures, insolvencies and emergency re-financing.

Now it appears that specialists in a range of sectors, including accountancy, investment banking and law, are preparing for a big wave of company insolvencies in the coming months. When the government-led furlough and loan schemes come to an end, it is likely that thousands of companies are going to be suffering serious cashflow problems.

Calm before the storm

A large number of companies have had to deal with immediate liquidity issues caused by the pandemic, with many agreeing covenant waivers with their creditors. However, it is estimated that very few companies are fully prepared for a second wave of the virus or for a much deeper downturn in the economy that’s likely to result from it.

Experts predict that the full wave of insolvencies hasn’t even started yet, and many restructuring experts have been appointed to strengthen businesses so that they can cope with what’s to come.

A shift from re-financing to insolvencies

As the furlough scheme stops at the end of October, there will be companies that just cannot survive. Insolvency specialists have been focused on helping companies, including swaths of businesses on the UK high street, to restructure business debts and raise capital to avoid collapse.

However, due to the winding down of state support schemes, a large number of insolvency proceedings is expected to be triggered. Sectors that are predicted to be the worst hit include retail, the casual dining and travel sectors, many of whom are currently negotiating with landlords, lenders and suppliers.

According to the British Property Federation, 16 Company Voluntary Arrangements (CVAs) have already been arranged in 2020, compared with 12 for the whole of last year. 

John Bell, the senior partner at Clarke Bell, said:

“Conditions are really tough for a lot of companies and things are going to get harder for them when furlough finishes at the end of October.

Any directors of a company which is having cashflow problems now should seek professional advice from their accountant – or an insolvency specialist.

I would advise doing this before you put any more money into the company. You don’t want to put good money after bad.”

Clarke Bell can help

If you’re the director of a company that’s currently having financial problems, the team at Clarke Bell is here for you.

There are a number of different options available to you, including a Creditors’ Voluntary Liquidation (CVL) and a new solution to help companies that have been knocked off balance due to the Covid-19 crisis – thanks to the Corporate Insolvency and Governance Act 2020 which came into effect on 26 June 2020.

These new rules provide a great deal of hope for a lot of companies and are intended to help a company which:

  • is built on solid foundations
  • was performing well before Covid-19 struck
  • needs some breathing space to get through the issues caused by the current pandemic.

The procedure is not a solution for a so-called ‘zombie’ company, as it is not intended to be used by a company that has no chance of avoiding failure and is merely looking to postpone going into a formal insolvency procedure.

To make this new solution work there are a number of different steps to go through, including:

  • a new ‘debtor in possession’ Moratorium procedure. This gives a company 20 business days’ protection from creditor action
  • getting new finance for your company
  • a Company Voluntary Arrangement (CVA) which would typically last 12 months.

We can help you every step of the way.

What to do next

Contact us today on 0161 907 4044 /

We will work with you to find the best possible solution for you. It is essential that you get experienced, professional advice as soon as possible – before you put any more money into your business.

Our fees are affordable, and our staff are professional and friendly.