Facebook - Birmingham Business Twitter - Birmingham Business Instagram - Birmingham Business
https://www.pulsecashflow.com https://www.lokiwine.co.uk

Businesses believe they will need a new approach

Businesses looking to stay afloat over the next twelve months are more likely to need to enter a formal insolvency process rather than undertake a financial restructure.

This is according to research from insolvency and restructuring trade body R3, which indicates that its members believe they will see a shift from informal corporate restructuring to formal insolvency procedures between this summer and next spring.

R3 asked members who work in corporate insolvency and restructuring which tool they thought they would be most likely to recommend over the next month. Over two-in-five (44.4%) said they expected to recommend restructuring, with 26.5% predicting they would most commonly recommend financial restructuring and 18% operational restructuring.

Of the formal corporate insolvency options, fewer than one-in-five (19.1%) said they expected the most-recommended tool over the next month to be a Creditors’ Voluntary Liquidation (CVL), 14.3% said administration, and just 4.2% said a Company Voluntary Arrangement (CVA).

Within the next year, however, over a third (37%) said they expected a CVL to be the most commonly recommended tool, while around a third (34.9%) said they expected it to be a formal administration procedure, and 16.4% said a CVA. Only 7.4% expected financial restructuring to be the most commonly recommended procedure in 12 months’ time, and just 1.1% said the same about operational restructuring.

R3 Midlands chair Eddie Williams, a partner at Grant Thornton in Birmingham, said: “Our members anticipate demand for our support to shift from restructuring work towards more traditional insolvency processes over the next twelve months.

“This means that, over the short term, our input is likely to focus on providing turnaround support for business rescue. In the mid to long term, however, the balance will switch to supporting businesses through more formal restructuring or insolvency procedures.

“Some businesses may still have a prospect of rescue through administration, while others may not and will be wound-up through a liquidation. The question is how this balance between rescue and winding-up will play out over the coming months.”  

The R3 survey also asked members about the effectiveness of Government measures to support businesses through the pandemic. Seven in ten (70.5%) named the Job Retention Scheme as “very effective”, nearly half (45.9%) said tax payment deferrals, and more than a third (35%) named the business rates holidays.

Eddie Williams continued: “Employee costs are usually the largest expense for a business. The Government’s Job Retention Scheme has lifted much of this obligation from the companies which took part, while tax payment deferrals have also helped manage a sizeable expense and a common trigger for corporate insolvencies.

"Such cash flow support has enabled business supply chains to continue to function in some way during the pandemic. The new tools aimed to promote business rescue, introduced in the Corporate Insolvency and Governance Act, should also enhance the rescue prospects for many struggling companies.

"Inevitably, however, there will be some businesses who are, or will be, concerned about their financial health. R3’s advice is not to hold back – talk to a qualified professional as soon as difficulties arise. Doing so will afford the best chance of recovery and will greatly improve the options for business rescue."

Pictured: Eddie Williams


Finance group appoints new expert

Business development manager joins award-winning group

22nd February 2019

The power of asset finance

Acquiring the assets you need when you need them

1st July 2020

Quarterly fall in corporate insolvencies

But experts say figures are disguising true picture

9th November 2020

Report reveals cashflow worries

Chamber says Coronavirus has heightened existing problems

15th April 2020

Exports hold up despite disruption

Chamber survey shows businesses report increase in international sales

10th May 2021

Trade body calls for greater clarity

Insolvency and restructuring organisation predicts more insolvencies

26th February 2021

Reasons for hope

Corporate financier Paul Heaven looks into his crystal ball

25th May 2020

Chamber calls for cash to be reallocated

More than £1bn Covid support funds returned

9th December 2020

Major network restructure unveiled

Search is on for new leader for Greater Birmingham area

16th December 2020

New face takes helm at financial brokerage

Former head of intermediary relations steps up to top job

16th March 2021

Funding brings support for SMEs

Unity Trust Bank initiative will help businesses struggling during pandemic

15th May 2020

Boosting business in the region

Midlands Engine Investment Fund (MEIF) improves access to finance

23rd June 2020

Property finance specialist joins team

Credit control manager is appointed

24th September 2020

Accountants retain top ten ranking

Firm climbs to higher position in financial adviser category

1st March 2019

New loan fund unlocks £40 million

Small businesses across the Midlands will benefit

28th January 2020