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R3 North East Chair Calls For Chancellor To Make Early Announcement On Business Support Measures

North East business owners can’t rely on Rishi Sunak continuing to meet their firms’ operating costs indefinitely – but he should let them know how long he’s going to keep doing so sooner rather than later.

That’s the call from Alexandra Withers, North East chair of insolvency and restructuring trade body R3, in advance of the Chancellor’s impending spring Budget and the scheduled end of some of the support measures the Government put in place to mitigate the impact of the pandemic.

As things stand, restrictions preventing landlord forfeiture action, the ban on winding-up petitions and the suspension of wrongful trading liabilities are all due to end on 31 March, with the furlough scheme scheduled to last until the end of April.

The eventual removal of these support structures will once again leave businesses liable for covering all their usual operating costs, as well as susceptible to the risks and penalties of not doing so.

A number of extensions have previously been given in light of changing and challenging circumstances, but Alexandra Withers believes that, while everyone accepts that the measures will come to an end at some point, the lack of certainty around when that will be is making it harder for directors to plan for the future.

She is now calling on the Chancellor to reveal as soon as possible whether any further extensions are in the offing, as well as advising business owners to ensure they are as well prepared as possible for covering any sudden increase in costs and ready to take early, qualified advice if they’re concerned that their business won’t be able to do so.

Alexandra Withers, who is an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors in Newcastle, says: “The support measures and protections put in place by the Government have undoubtedly made a huge difference, which has been illustrated by the fact that, despite the prevailing economic conditions, the number of corporate insolvencies actually fell in 2020 compared with the previous year.

“But despite this, a wide range of North East firms have still barely kept their heads above water, and the clear concern is that a sudden return to having to meet their full cost liabilities in an economy that’s not yet fully functional will be enough to push many of them under.

“What would really help business owners is for the Chancellor to give them the maximum amount of notice possible about whether he’s going to extend the support measures that currently remain in place, or whether he will stick to the current timetable for their removal.

“Previous extensions have tended to be announced close to the last minute, which has been difficult enough when the support measures have stayed in place, and having to manage their removal at such short notice would be a huge challenge for many regional firms.”

The Insolvency Service’s official figures for 2020 showed a 27.1% year-on-year fall in the number of corporate insolvencies across England and Wales, from 17,224 in 2019 to 12,557 last year, but also revealed a 16.9% increase in the underlying number of corporate insolvencies in the final quarter of the year from the previous quarter.

Alexandra Withers continues: “The recent increase we’ve seen in the corporate insolvency rate suggests that the economic impact of the pandemic may now finally be being realised, and it’s plainly a question of when, not if, insolvency numbers will increase this year.

“Many firms have been keeping going by generating much-needed cash through selling off different assets, but this can only ever be a short-term strategy and there will obviously come a time where there is nothing more left to sell.

“Taking an early, detailed, honest look at their companies’ finances is the only way for North East business owners to get a clear picture of where they stand now and where they are likely to be as the coming months unfold.

“Proactively seeking advice from a qualified and reputable source will provide them with the best chance of finding a way to overcome any problems they see coming down the road, and the sooner they do so, the wider the range of potential solutions will be.”

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