Lockdown - Reflections at the end of week 3
Updated: Apr 17, 2020
The end of week three of the lockdown being a public holiday, this week’s reflections come a day early. This in itself indicates one of the peculiarities that many, including me, are experiencing in the lockdown, with the rhythm of the working week being changed beyond all recognition and a public holiday which is not marked by an absence from the physical workplace or an ability to leave the home being hard to notice.
So what have we seen this week?
A large number of businesses have furloughed staff. The number that have appears to have surprised the Treasury, with there being reports that take up is up to four times what was expected. Whist in some cases, Premier League clubs being at the higher profile end, questions have been raised about the moral correctness of use of the scheme, it is and will be an important tool for businesses who have seen significant downturns in trading or which have had to shut down altogether. Others may have used it on the basis of grab it while you can during the initial post lockdown period whilst they assess their longer term position and strategy. Expect businesses to continue to use furloughing, and, depending on the length of the lockdown, there to be further waves of it. However, it is also possible that changes may be made after May which will narrow the availability of the scheme down to those who have the greatest economic need for it
There remains a conflict for directors between doing what, in conventional terms, has always been prudent and correct when a company faces an uncertain length of time of incurring losses and the desire of the Government that businesses remain intact for the post lockdown period. We have seen a range of approaches, from a determination to get through using as many of the tools made available to date as possible to a real worry about whether it is right or sustainable to do so when the end of the lockdown is not yet in sight. For those in the latter camp, the amnesty on wrongful trading is a comfort, but it is not the complete answer
Against a stumbling start, we are now seeing loans coming through on the Business Interruption Loan Scheme, although for larger loans, the security position, including personal guarantees, can still be problematic
Landlords of commercial property are taking vastly different approaches. One of our clients has spoken to us of its experience of one landlord who has waived a quarter’s rent, another who has deferred but still will need to be paid in the future and others who have moved straightaway towards taking the rent deposit. What it tells us is that some landlords at least will be developing concerns about their own ability to meet their financial commitments
Flexibility remains key. In a world where record turnover for a period or in one business area can be followed by a significant drop, directors have to keep planning, be alive to threats and opportunities and be open minded; and
On a more optimistic note, some businesses in key supply areas are busy, with their greater problems being around ongoing availability of labour and raw materials and, for those brave enough, the market is beginning to offer investment opportunities which will be heavily discounted due to risk
We wish you all a restful Easter weekend.
Ian Waine leads Prettys’ Corporate Services Team and has advised on a large number of corporate recovery and corporate restructuring cases over the last 30 years. He can be contacted on 07979 498817 or email@example.com.