This week marks the first step in a long transition out of lockdown. People are starting to look ahead, to a time where we have the freedom to travel, socialise and engage with the economy.
Businesses are gearing up for a big return to work but many of them, particularly in consumer-facing sectors, are on their knees. Going back to normal will not be an easy journey.
Various government support schemes mean businesses have a lot of options when it comes to lifelines. Furlough is continuing until September, while the Recovery Loan Scheme has continued where BBLS and CBILS left off.
While the multiple extensions to such measures have been essential to keep many firms afloat during the lockdowns, this has also encouraged businesses to take a ‘wait and see’ approach when it comes to making any decisions about their future. And that is dangerous.
If you’re carrying yourself along in the safety net, what happens when it’s taken away? There will come a point where it is too late to act, and this is why business owners should be thinking long and hard about the future now.
Bring back businesses from the brink
People think of insolvency as bayoneting the wounded. It’s considered a last resort when all other options have been exhausted. But insolvency practitioners are, first and foremost, business rescuers. They bring companies back from the brink as much as they liquidate them.
The decline curve is often discussed in insolvency and the further up you are on that curve when you get advice, the more options you've got. If support measures are ending in September, those struggling businesses should be reaching out for help now.
Accounting firms should be getting this message out to their clients. Things are starting to unravel and ICAEW members can be a major part of the solution, through their direct advice and by connecting clients with restructuring and insolvency professionals.
At a time when clients are starting to seek help from their trusted advisers, those advisers and the work they do are subject to a number of government consultations that have the potential to lead to major reform. Further consultation is currently sitting in the departure lounge, namely the Insolvency Service’s review of insolvency regulation, which we are told will appear late Spring. This will arrive at a time when firms and businesses are working through the likely audit and governance changes outlined in the recent BEIS proposals.
While ICAEW will make sure members, and restructuring and insolvency professionals, are kept informed about future consultations, it is important that the government does not risk destabilising a sector of the profession at a time when those trusted advisers should be rolling up their sleeves and helping clients.
Consider your options
Despite this complication, we have an obligation to help businesses be ready for when that safety net is removed. Business owners need to seriously consider their options, guided by their trusted advisers.
As the economy starts to open up, ICAEW is running a series of articles on business rescue. We want to start a conversation that explores the ins and outs of what insolvency and restructuring work really involves, the options it can provide and why it’s necessary right now. Above all, we want to open minds about what this work really offers business.
We also want to reposition failure as not necessarily the end of something. It could be a new beginning. There is still stigma attached to failure, but it can be channelled to positive ends. This pandemic has been tough on us in many ways, but it has also given us time to reflect. It’s a major opportunity for business owners to take stock, look at their business model and activities, and make a change. They should take it before it’s too late.
ICAEW Insolvency: ICAEW is the largest insolvency regulator in the UK. We offer the opportunity for ICAEW Chartered Accountants and non-ICAEW members to qualify and be licensed as insolvency practitioners with us.
We also offer a comprehensive programme of support for our current and future insolvency practitioners including membership to our Restructuring & Insolvency Community.