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During the pandemic many UK businesses received financial support from the government, in one form or other. But as boards review their business strategies in 2021 how can they assess the implications of this financial support being withdrawn? Below is some guidance to support boards with answering this question.

How can the business withdraw from government financial support?

Although it was necessary at the time, how can boards gauge when their business has recovered sufficiently to mean government financial support is no longer required? Potential impacts could include reputational risk should stakeholders come to expect that you will no longer rely on such support.  In some cases, stakeholders might expect grant funding to be voluntarily repaid, where the company is able to do so. 

An effective communication plan could: 

  • set out to shareholders and key stakeholders the organisation’s thinking behind accepting or rejecting the support in the first instance, and 
  • its plans to withdraw from support schemes, repay or retain cash received.

When can the business plan to return to ‘normal’?

To mitigate the danger that businesses rely on emergency financing arrangements for longer than necessary, new management reporting might be necessary. Closer than usual scrutiny of cash-flows could help to track reliance on emergency funding and chart a faster path back to normality once trading recovers. 

Relevant questions include:

  • Have you used any cash received or is being kept as a buffer?
  • If you have capacity, could you replace government loans with more traditional forms of funding, if available? That might help remove any associated restrictions or mitigate reputational risk.
  • If you operate in multiple currencies and received support in multiple countries, what opportunities exist in the foreign exchange markets to optimise any necessary repayments?
  • Have you received any indirect financial support such as delayed tax payments? If so, do your plans and budgets reflect repayment of these obligations?

What are the working capital implications?

Some businesses may have taken exceptional measures to either withdraw or extend working capital – possibly both. For example, some business may have been obliged to offer financial support to customers, such as rent holidays. Equally, some businesses may have run down inventories to reduce working capital needs. Implementing these changes could have directed resource away from other planned activities. Consider whether these changes are temporary or permanent and how they will impact on your strategy and plans.