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COVID-19: Independent Advice from Professional Financial Consultancy Begbies Traynor

Gary Lee, North West Partner and a specialist in Business Rescue & Recovery at Begbies Traynor, shares an insight into how it can help businesses through the COVID-19 pandemic.

The lockdown has proved to be a challenging time for businesses up and down the country, especially in the furniture industry. Enforced closures and trying to navigate through uncharted territory has made life as we know it change. And for businesses constantly combating the impact of the coronavirus pandemic, it can be an equally challenging situation when trying to safeguard the company and its employees.

Thankfully, there are businesses out there that specialise in meeting these challenges head on, providing information on the best way to move forward. Sometimes it means restructuring. Sometimes it means closing.

      We are working closely with directors, funders and other stakeholders to identify all options available to  companies in order that they have the best chance of survival in these strange times. 

Recent figures from the Insolvency Service indicated that the number of companies entering insolvency procedures in the first quarter of 2020 in England and Wales decreased by 8.5% to 3,883 when compared to both the previous quarter and the same quarter last year.

Breaking this down to the furniture industry, manufacturer-related insolvencies fell 7.6% against the same period last year, although they did rise by 56.5% on the previous quarter.

However, these latest figures give little indication of what may be to follow with such a change in trading conditions and will more likely reveal a clearer picture later in the year.

So, the question is, what should you do if your business is struggling? We spoke to Gary Lee, North West Partner and a specialist in Business Rescue & Recovery at one of the leading restructuring firms in the business, Begbies Traynor, to find out exactly how it can help in these unprecedented times.

"Following the lockdown on 23rd March 2020, we initially saw a flurry of enquiries from Directors asking about the options available to them with the Coronavirus Job Retention Scheme (CJRS), Coronavirus Business Interruption Loan Scheme (CBILS) and the deferral proposals put in place by HM Revenue & Customs (HMRC).

"There has been a swift response by the government to provide much needed support to businesses which have provided some temporary breathing space whilst we try and weather the unprecedented times that we are all experiencing. As such, a great number of directors have been able to use the government initiatives to bring some stability to their business without the need for formal restructuring or insolvency procedures."

Gary makes a sound reminder to those businesses that have not explored Government options to do so and reflects on the help he and his team have been able to offer so far.

"We are working closely with directors, funders and other stakeholders to identify all options available to companies in order that they have the best chance of survival in these strange times."

"If there was a sound and profitable business prior to lockdown then in most situations they should be able to mothball the business until such time as the restrictions are lifted and the business can be operational.

"Other businesses have actually seen an increase in activity as their goods and services are in high demand or they have adapted their business model to fit in with the new landscape we now all find ourselves in."

On this note, some furniture manufacturers have already adapted and have supported the NHS and local areas through PPE supply. Gary added that in these situations Begbies Traynor has been helping companies raise additional working capital to take advantage of this sudden upturn in demand.

However, there are businesses that were struggling prior to the lockdown which have been unable to withstand such a dramatic impact on their profit and turnover.

"These businesses have approached us to assist them in placing the company into Liquidation or Administration, as even the new measures introduced are not sufficient to save a failing business that was already struggling," Gary explained.

So if your business is on the unfortunate end of the scale, what help can Begbies Traynor offer?

Gary said: "If the directors of a company are now faced with a business, that pre-CoVid was healthy and profitable, but have now seen a dramatic reduction in turnover, then swift and decisive action is required to ensure that there is a business that can re-open when it is safe to do so."
The Advice
  • "Perform a detailed review of the existing fixed cost base to see if any costs can be removed or if reductions can be negotiated, either permanently or temporarily.
  • "Liaise with shareholders and investors to generate further cash reserves and working capital to provide as large a cash buffer as can be secured.
  • "Speak to key creditors and suppliers to agree formal deferral plans to ensure that cash reserves are maintained.
  • "All stakeholders and supply chains need to work together to ensure that we have businesses to come back too."

With an unprecedented time, comes unprecedented changes that should present flexibility to also help. Gary said that it is "extremely difficult" to forecast in the best of times and that it is "near impossible" to see over the short term horizon. With this in mind, businesses will hopefully see relaxed pressures from creditors and more patience.

"Funders and creditors, and in particular HMRC, are going to have to be patient with businesses to ensure that support measures are in place and continue until employees can get back to work and demand picks up.

"Unfortunately there will be companies and businesses that will not regain their pre-lockdown status and will not be able to trade on in their present state without some more formal restructuring and insolvency procedure.

"If a company has lost 25% - 30% of its turnover, then that can sometimes be too big a hole to fill, especially if the overhead base cannot be reduced. Seeking specialist professional help is essential to ensuring that the business is given the best chance of survival.

"The recently introduced insolvency legislation of the Corporate Insolvency and Governance Bill is a welcome addition to the tools available for restructuring & insolvency professionals when looking to save jobs, maintain continuity and maximise realisations rather than let companies just shut the doors. The introduction of a new moratorium regime will enable companies to restructure, refinance and keep trading whilst a rescue plan is formulated."

The best chance of survival, according to Begbies Traynor, is to make sure that all government initiatives are being explored to see if they are right for your business.

"Speak to all key stakeholders to ensure that support is provided wherever possible, either through delayed payments or cash injections. Keep close to customers and supply chains to understand what else is happening in different geographical areas and other businesses," Gary said, concluding with a final thought.

"Think about whether the product can be adapted to reflect the demands of the environment we now find ourselves in. More people are working from home, house moves may be put on hold due to the prevalent uncertainties so home improvements may increase and UK based vacations may be the order of the day.

"The key question is how long will it take for demand to get back to pre-lockdown levels and whether businesses have the financial security to see them through this period- however long it may be. If in doubt, seek professional advice."

Gary Lee is a Fellow of the Institute of Chartered Accountants in England and Wales and a Licensed Insolvency Practitioner with over 30 years experience in the profession.
He has worked extensively with Banks, Asset Based Lenders & Private Equity on mid market & SME assignments.
He has a broad range of experience gained through a variety of assignments, working on formal insolvency appointments, informal workouts, debt negotiations and independent business reviews.

Find out more about Begbies Traynor here:
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