Hospitality supply chain under new insolvency threat
16th October 2020UK ‘Sleep-walking’ into Debt Crisis Because of Covid
16th November 2020There is widespread concern that stricter coronavirus restrictions imposed in the North of England could have severe consequences for hospitality businesses, suppliers and other firms.
New research from the Office for National Statistics (ONS) suggests that more than a third of British hospitality companies are at risk of going bust due to the resurgence of the pandemic.
Survey evidence revealed that 17% of food and accommodation businesses reported a ‘severe’ risk of insolvency, while 21% said the risk was ‘moderate’.
Industry commentators are concerned that entering ‘tier three’ could be a death knell for many small businesses. The Liverpool City Region was the first area to be placed into the new ‘very high risk’ category on England’s new coronavirus alert system.
Tier three restrictions mean that any pubs and bars not serving meals must close. It also means that there is to be no mixing between households indoors or outdoors in hospitality venues and that there will be guidance on travelling in and out of the area.
Lancashire, Greater Manchester and South Yorkshire all followed Liverpool into the tier three system. London, meanwhile, was placed under tier two restrictions, meaning that different households could not mix indoors – placing a more minor strain on hospitality and other businesses.
When announcing the new three-tiered coronavirus alert system, Chancellor Rishi Sunak made clear that employees at businesses forced to close as a result of tier three restrictions would be supported. Affected employees would receive two-thirds of their normal wages under the ‘furlough-lite’ scheme.
The Chancellor also recently extended support to firms in tier two areas like London, where businesses have not been legally forced to close, but have shut up shop because remaining open is not commercially viable. These businesses will be able to get their hands on a £2,100 cash grant to hep them through ‘difficult days and weeks ahead’. Businesses will also be able to claim this money retrospectively, meaning that hospitality businesses in Greater Manchester that have been under tier two restrictions for several months should be able to claim.
Even with these concessions, there are many small and medium sized businesses that will not receive any support.
Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency, said: “Businesses that stay open but trade at significantly lower levels, businesses in the hospitality supply chain and businesses that rely on large numbers of people travelling in and out of cities will not be able to access this support, but they will still have to pay bills and expenses.
“The only meaningful support available to many businesses will be a combination of tax deferments and government-backed loans, but many businesses will see this as kicking the can down the road when there’s not much light on the horizon.
“Every business should seek professional advice before pursuing an voluntary liquidation or administration, but I believe it will be a popular course of action for many business owners at present.”
For more information about company insolvency, speak to a member of the team today. Call: 0800 611 8888.