How to save your business post-pandemic as tough times begin
PUBLISHED: 09:50 16 September 2020 | UPDATED: 16:04 16 September 2020
Businesses should be bracing themselves for the removal of the government’s coronavirus safety net, legal experts have warned.
With the furlough scheme due to wind up on October 31 – and loans, grants and mortgage holidays coming to an end – firms will face a host of new problems says Ian Waine, partner at Ipswich law firm Prettys.
No matter how financially sustainable the business model at the start of the year, the magnitude of the Covid-19 pandemic is likely to have affected firms’ revenue, staff and plans for the future in some way, he says.
Some will have adapted, others scaled back and some forced to shut down altogether – temporarily or permanently.
“Sadly for some of these, the worst is still to come as government help is phased out, taxes are raised and the recession starts to bite. This is why its vital to start exploring your best and worst-case scenarios right now and decide on a plan of action – with a focus on rescue and recovery,” he says.
Businesses should focus on the following, he says:
This is the place to start. All businesses will need to adjust and re-assess their finances, the markets in which they operate, their customers, their ways of working and their operations.
The chances are that 2020 budgets and forecasts prepared in 2019 may now be of limited relevance and will require significant revision. After updating forecasts, you may need to streamline operations. This may lead you to a restructure of the business.
The aim of a restructure is to make your business more efficient as well as a more profitable.
Corporate restructuring often takes place when a company is experiencing financial difficulty but it is not limited to distressed companies. It also provides the perfect opportunity to reflect not only on the current position of the business, but to take steps to protect it for the future.
With restructure often comes the risk of redundancies.
You may also want to watch:
Throughout the pandemic, the government introduced programmes to protect staff from redundancy – including the furlough scheme.
As the scheme nears its an end on 31 October, employers will be faced with making contributions to furlough pay and then whether employees can return to their duties. If not, it may be necessary to consider alternatives or ultimately termination of employment.
In such cases, the usual employment law rules would apply in relation to the substantive and procedural fairness of any such redundancy process.
It’s important to remember that redundancy dismissals may be an unfair dismissal, if they take place in circumstances where an employer did not properly consider alternatives, including retaining the employee on furlough if possible and considering the Job Retention Bonus - £1,000 which the government is offering to UK employers for every furloughed employee who remains continuously employed until the end of January 2021.
Refinance and rescue
Regardless of whether you restructure or make any redundancies, you may also need to look at refinancing.
Refinancing is a way for a business to get the breathing space it needs within its cash flow.
Businesses that were seeking to refinance would start the process of with a consultation with the different stakeholders, particularly the legal and funding teams.
You need to know your business inside out, have plans in place for different scenarios and plan for the deal to take some time to iron out.
According to some recent estimates, there are half a million UK firms currently at risk of collapse.
They will be looking at various options such as voluntary arrangements, out-of-court restructurings and administration, which can all be used as part of a business rescue, or, where rescue is not possible, liquidation or bankruptcy .
Whatever you choose to do, don’t do it alone. Getting the help of professional advisers, which will often include lawyers, insolvency practitioners and accountants, will make the process smoother, will ensure you do things properly and will help to avoid the expensive pitfalls which await the unwary.
If you value what this story gives you, please consider supporting the Ipswich Star. Click the link in the orange box above for details.