• Prettys Solicitors

Two weeks into lockdown - how is business support playing out?

Updated: Apr 17, 2020

Coming to the end of the second working week of lockdown, the Government faces a vast number of challenges, the first priority being to ensure that it enables the whole of the UK’s healthcare system to have what it needs to care for those with Covid-19 and to control its spread.

High on the list of priorities that follow is support for businesses to ensure that crucial services and goods remain available, employment is maintained and businesses remain intact so that following a relaxation of restrictions, the economy is in a position to come out of hibernation quickly and effectively. 

The following are a few thoughts derived from Government announcements and from our work with companies and their directors since the start of the lockdown:

  1. There is an acceptance that the Government is facing an extraordinary set of challenges.

  2. There is a tendency, entirely understandable in the circumstances, for Government to announce policy first and for the details to come later, or for policies to be refined on an ongoing basis.

  3. Whilst a number of the policies announced are very helpful for businesses and have been actioned widely, for example the furloughing of employees, others have been less effective. The difficulties which companies have experienced in accessing Business Interruption Loans, for which Government and the lenders have pointed the finger at each other, is probably the clearest example of a policy which has yet to deliver. The recent announcement about a relaxation of the rules relating to Business Interruption Loans is welcome, although the lack of control over interest rates on Business Interruption Loans may still cause problems

  4. It is interesting to note where direct support has come from Government and where it is not available. For example, the passenger train operating companies have been offered a means of direct support, as have the bus companies, but airlines have not. The determining factor has been the support for those needing to get to work, but the airline industry will argue that it has a role, albeit, a limited one, to perform to the national benefit. There are other sectors which can also make a cogent case for support - for example, the supply chain for food. How will the Government deal with this if it shows signs of deterioration?

  5. Whilst many business owners may not be particularly sympathetic to the position of their landlords, landlords could be facing a perfect storm. Rent is being deferred now, and businesses who are being encouraged to borrow and to defer a number of payments, including rent, PAYE and VAT may face a wall of debt once trading becomes more normalised as the obligation to repay loans and to make up deferred payment kicks in. This situation will arise at a time when the cranking up of business is likely to require further working capital. Landlords will, throughout this time, have ongoing obligations to their funders and could be faced with a blend of businesses who have survived but who need to schedule their rent and businesses which have not survived and, as a result, empty properties for which there are no longer prospective tenants. Will the Government intervene to support landlords? This seems politically difficult but may become necessary for a variety  of reasons

Our work with clients has shown a real determination of business leaders to do all that they can to get through and this approach is impressive and encouraging. We would encourage those leading businesses not to suffer in silence. There will be tough moments and difficult decisions to be made, but advisers are on hand and willing to support through the difficult times, so please use them and don’t be afraid to admit that you need their help - you will by no means be alone.

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 iwaine@prettys.co.uk.

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