A year after the UK’s first national lockdown was introduced in a bid to contain the COVID-19 pandemic, the negative impacts on the economy and thousands of businesses are still being felt.
After all, GDP fell 19.8% in the second quarter of 2020 – the most since records began. Thousands of businesses have been forced to close their doors, temporarily cease to trade or drastically change the way they operate. What’s more, there have been widespread job losses and business closures in the past year.
However, it’s not all bad news. UK GDP rose by 1.2% in December 2020 when lockdown restrictions were temporarily eased, which subsequently boosted service sector activity.
Now, as the Prime Minister Boris Johnson has a roadmap out of lockdown, many UK businesses will be looking at what the outlook will be for them in 2021 and beyond.
To help businesses of all sizes and sectors gain a better understanding, in this guide, Clarke Bell looks at the forecast for the months ahead.
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Impact on employment
One of the biggest challenges facing the UK government is the end of the Job Retention Scheme.
The furlough scheme was introduced by Chancellor Rishi Sunak following the first lockdown to help businesses that couldn’t maintain their workforce because they had been badly impacted by the pandemic. This has helped to stop unemployment from rocketing during the pandemic acting as an incentive for businesses to keep their employees.
However, once it comes to a close, it is widely thought that unemployment rates will spiral as many businesses won’t be able to afford to keep employees on.
After all, redundancies rose at the fastest rate on record towards the end of 2020 as many struggled to stay afloat due to the pandemic. Now it is predicted that the jobless rate will peak at around 7.5% in mid-2021 which will signal around 2.6 million people out of work. This is up from 4% in pre-pandemic times.
Impact on consumer spending
During the third UK lockdown, consumer spending has reached its lowest levels since Spring 2020 according to surveys by the British Retail Consortium and Barclaycard.
In January 2021, consumer spending was down by 16% year-on-year. Particularly impacted were department stores and clothing retailers.
It is now predicted that the economy will grow by 3.4% in 2021 compared with the 5.9% that had been expected in November 2020.
For retail businesses this might mean that it could take a while for them to bounce back after lockdown eases, as times will be tough amidst low consumer spending and rising unemployment.
However, it is not all bad news for retail, as online sales have boomed, with the share of online sales reaching an all-time high and now accounting for over a third of total spending.
This could mean UK businesses may look to invest in online retail as more and more consumers change the way they shop.
What options are there for struggling businesses?
The road ahead looks tough for many UK businesses, with consumers set to spend less due to uncertainty, job losses and less disposable income.
If you are worried about your company’s poor financial health or cashflow, you should seek expert insolvency advice at the earliest moment.
The sooner you seek advice, the more options will remain open to you. These include putting the company into liquidation, or administration, or using a Company Voluntary Arrangement.
However, if the company is longer sustainable, the best way forward is likely to be liquidation.
Liquidation is a formal insolvency process that legally winds-up a business meaning it must stop trading and will be officially dissolved. A licensed Insolvency Practitioner must be appointed to oversee and implement the liquidation process.
The main types of liquidation are:
- Creditors’ Voluntary Liquidation (CVL): this is applied for voluntarily by directors when a company can no longer feasibly operate
- Compulsory Liquidation: this is forced on a company by creditors who are owed money and have had several repayment demands gone unfulfilled. As it sounds, this is the most serious form of liquidation.
Let Clarke Bell help you with the next steps
If you think that liquidation might be the best way to deal with the debts of your company following the knock-on effects of the pandemic, Clarke Bell are here to help.
We can offer specialist insolvency advice to help you deal with your problems whilst making sure you meet all your legal obligations. Get in touch today to see how we can help.