What will be the impact of lockdown on business insolvency?

By Mr Bankruptcy

30th June 2020

As we see lockdown measures easing, the Government is looking to drive a bounce back in the UK economy, but figures reported in June by the OECD state that our economy is set to decline by 11.5% in 2020.

Such an economic decline suggests that many businesses will have suffered greatly during lockdown, but what has been the impact on business insolvency?

The initial impact of lockdown

Initially there was a downturn in insolvencies. The average daily compulsory business liquidations fell to 20% of the pre lockdown figures in March. There are a number of reasons for this initial decline, including a reduced number of court hearings and the Government’s introduction of some emergency measures to protect as many businesses as possible from insolvency action.

Despite this, with business profits down by an average of 29% for the first thirty days of lockdown, longer term, there are obviously serious concerns for many businesses regarding the future. A survey by CEBR reports:

1 in 10 British businesses say there’s a high risk they will enter insolvency as a result of the coronavirus crisis. This is more than half a million (591,000) businesses
51% of businesses believe there’s at least a small risk they will go insolvent due to the crisis. That’s nearly 3 million firms.

Moving on from lockdown

These statistics seem pessimistic but there is reason for optimism too. During lockdown we’ve seen many businesses work hard to innovate and adapt, finding alternative ways to provide products and services.

I’ve previously spoken about why firms become insolvent we’ve seen business owners make changes to mitigate those risks by making their business relevant in the “new normal”.

Still, uncertain times may be ahead and business owners will be worried about insolvency. One in six firms say they will need at least a year to recover and during this time we will get a clearer picture of just how many survive the longer-term impact of such a dramatic shift in the global economy.

James Rosa Associates

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Our services include:

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We are authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients to produce bespoke solutions to fit their specific circumstances.

Find out if you qualify for a free consultation

If you want to deal with an unmanageable debt, or bring a dispute to a swift and cost-effective resolution, contact James Rosa Associates, ring 0845 680 7217 or email enquiries@jamesrosa.co.uk to find out whether you qualify for a free consultation.

Do you know the financial impact lockdown has had on you?

By Mr Bankruptcy

18th June 2020

In April, The Guardian reported the economic impact of the lockdown would mean households will see a monthly fall in disposable income of £515 per household. In addition, between the 20 and 30 March 2020, 49.6% of people in Great Britain reported “high” anxiety, the most common causes being work and finances. In these situations, it can be critically important to reassess your finances and take action if the sums don’t add up.

When did you last assess your financial situation?

It’s likely that over lockdown your income and outgoings will have changed. Take time to record carefully everything you’re spending and your revised income. You need to understand the gap between these two figures before you can really understand what action you need to take. Also, make sure you keep on regularly reviewing your finances for any more changes.

What you’re losing v what you’re saving

Many expenses, such as rent, mortgages and bills may remain the same, but you might be saving on costs like commuting, buying lunch at work, your morning coffee, eating out etc. These savings may be significant and help balance some of the loss of income and maybe, you can put some of it aside to save. Also, remember to check for any refunds you may be eligible for because of missed holidays or refundable membership fees.

Understand your financial commitments

Some outgoings you’re committed to and there will be consequences if a payment is missed. Mortgage, rent, utilities bills, credit cards, existing debt repayments can all increase your financial burden if you fail to keep them up because of fees, penalties, added interest or even direct action taken by creditors.

Ensure you know how much you’re committed to paying each month. Know which payments take priority and take time to understand initiatives the Government has introduced, such as mortgage or credit card payment holidays, which can relieve the immediate pressure from such commitments.

Don’t ignore your financial worries

Stress can be good – it can be a warning sign and it can spur you on to take action. You need to know if your income can’t support your current level of expenditure so it’s essential you take that first step and assess your financial situation. Then take action to minimise the impact of your new financial circumstances and, importantly, don’t be afraid to ask for help if you aren’t sure what to do next.