The Lull Before The Storm?

By Tim Corfield

 

These days I’m constantly being asked “You must be busy?”

I reply “Not as busy as you might think!”

The official statistics prove my case. The average monthly number of corporate insolvencies last year were 1435. For the first quarter this year they were 1361 and for the second quarter they dropped to 959. That’s a decrease of one third from the average in 2019.

But, we read, we’re in the worst recession for years and the economy contracted by over 20% during the second quarter.

So, what is going on? Many companies have taken advantage of the job retention scheme (furlough) and the loans that the government have made available. These measures have distorted the market place.

9.4 million employments (to 30th June) have been placed on furlough. Well over one million employers have made at least one claim. Employees of smaller businesses were more likely to have furloughed staff than larger businesses. 57% of businesses with 5-9 employees have furloughed staff compared to 19% of businesses with at least 250 employees.

The Bounce Back loan of up to £50,000 has been particularly easy to access and over one million companies have clicked the two boxes necessary to have their applications approved with over £30 billion paid.

Many companies are now unsure what to do. Cash is running out and costs are increasing. The furlough scheme is starting to wind down and ends in October. What does the crystal ball say about sales? Nobody knows, of course. Do companies borrow more to fund losses, do they recognise that the business model they had before Covid doesn’t apply any more, or is there a viable business that can trade through?

We’ll see. In the meantime we’re pleased to help directors grapple with these massive questions. We’d be pleased to help the directors with budgets, the “what ifs” and the insolvency issues involved.

 

My mobile number is 077869 65009. Don’t hesitate to call.