Some optimism, some hope and a big dollop of realism – Insolvency and business in 2021Posted: Jan 21, 2021

I am already on the third draft of this blog. Every time I managed to get pen to paper the Covid situation or something else seems to upset the apple cart. However, if you cut through the noise and focus on the core issues, I think it is possible to look ahead with some degree of certainty. So, since the year started so badly let’s start this blog on a bit of an upbeat shall we? Despite the difficult year things are not all in the dumps and there is always some good that will come from the hardest business circumstances.

Going into another unusual year I think we have all learned some valuable lessons that we can apply to 2021. The doom merchants are out in force though and to be fair to them, there are clearly more potential problems ahead. Is it going to be a tough year and are we going to see the financial fall out of the pandemic? Yes, of course we are. The market is, well let’s choose a nice way of putting it, going to balance and adjust. Will that mean a recession of some sort? Very likely, yes, but we are in a position where we all know it’s going to come. That should give us some room to adapt and adjust. So, I am optimistic that the resilience the business community has shown so far will limit the damage.

Here are a few possibilities and suggestions then for the coming year. I use the word possibilities because after last year it would be a brave person who said predictions.

• Members Voluntary Liquidations may well increase in the first quarter of the year but continue at a high level through the year. We are already seeing an increase in the number of enquiries about this. Partly of course this is because we are specialists in ensuring that business owners make the most of an MVL process. That said, a tough 2020 and the potential of more tough times to come may well be a deciding factor for business owners. For many, this may be the time to take retirement, close up the business and enjoy a bit of downtime. It is also clear that changes are likely in respect of Capital Gains Tax so many we will want to advantage before the rates change. If you are considering closing up your business, call us. At the risk of blowing our own trumpet a little, we provide a much more comprehensive and personal service than many of the online quick solution merchants. There is more to MVL than just filling in a form, so you need an expert to make sure you get everything possible from your business as you retire or close it to move on to the next challenge.

• Cash has always been king, this year it is going to be even more important. We can see the shortening of terms and a general tightening up on payments becoming the norm in the coming months. In fact, we suggest that you take the time to look over your own terms because now, more than ever, you need to ensure your cashflow is up to scratch.

• We haven’t seen the end of rescue packages. Whether you agree on the methods or not, the Government has certainly been quick to offer support in most areas. Having started down that road they are likely to continue (in fact as I type there is another announcement expected) and that means some businesses may find themselves with a lifeline where they would otherwise fail. A sprinkle of realism is needed here though because there is a danger in allowing a small grant lull you into a false sense of hope. If your business is struggling already a sudden influx of government cash is only likely to delay the inevitable. Call us as soon as you think you may be heading towards insolvency because when the grant money runs out you could find you have simply dug the financial hole a little deeper.

• There will be less money around from traditional sources. As the government support comes to an end (and it will at some stage), it is almost certainly going to be the case that obtaining money from the banks and other traditional sources becomes more challenging. The lending sources have stretched themselves considerably over the past year and there is also likely to be a less vibrant market for some time. That will add up to far more careful lending. Inevitably that will mean financial difficulties for some.

• An end to Brexit uncertainty could be a boon or a burden, but at least we know where we stand. Regardless of your opinion on the Brexit issue it has to be at least some good news that a deal is in place. There is bound to be a lot of red tape, confusion and misunderstanding in the initial stages though. Businesses that deal with Europe have been in the dark for a long time and even if it is not an easy situation at least it is a known quantity now. Uncertainty and business make awkward bedfellows, so it has to be a positive step to have an understanding to work from. 

Overall, there is a surprising amount to be hopeful about in the coming year. If your business is agile and already on a solid basis, then you can certainly survive and even thrive. While redundancies are inevitable that will also mean many new businesses will appear. I am sure we are all aware of the statistics on the survival rate of start-ups, but the ones that do survive are likely to be lean and very capable.

There has yet to be a huge increase in insolvency, which is good news. Realistically though we do expect that difficult times are coming. So, our advice is to be optimistic and be hopeful but always be realistic about your situation. If you are in financial difficulty, then it is important to do something about it.

Call us if you need our help.