The past year has been difficult and challenging for thousands of businesses across the UK. With many experiencing the knock-on effects of the COVID-19 pandemic and subsequent lockdowns and restrictions.
Many businesses have experienced a loss of income. Have had to close altogether or drastically change the way they operate amidst a tough financial climate.
However, it isn’t all doom and gloom for businesses. On 3rd March the Chancellor Rishi Sunak announced his 2021 Budget. Outlining a range of measures designed to put the UK economy on the road to recovery.
Following the announcements, many UK businesses will now be wondering what the future holds for them. In this guide Clarke Bell looks at measures outlined in the Budget and how this will impact businesses.
Impact on Employment
The past year has been difficult for many businesses with employees. However, to help businesses struggling to maintain their workforce, it was announced in the Budget that the Job Retention Scheme, which was initially set to end at the end of April, would be extended.
The Furlough scheme will now run until 30th September 2021. Under the scheme, employers that can’t afford to continue paying their employees’ wages will continue to receive a grant to cover 80% of the cost of wages up to a maximum of £2,500 on the basis that employees are unable to work because of the pandemic up until July.
From July, the government will contribute 70% of employees’ wages and employers will need to cover 10% for hours not worked.
In August and September, the government will pay 60% and the employer will pay 20%.
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Support for businesses
This is expected to help around 130,000 small-to-medium businesses across the UK. Providing them with access to management and technology training as well as discounted software in order to boost productivity.
Under the scheme, businesses will have access to mentoring from top UK business schools and online services offering free advice on how to improve their digital capability, as well as giving them a 50% discount on approved software.
Businesses will also be given access to a 12-week management programme which will offer subsidised management training.
Another key measure introduced was the Recovery Loan Scheme. Designed to help businesses of all sizes access loans once the existing Bounce Back Loan scheme and Coronavirus Business Interruption Loans end.
The Recovery Loan Scheme will be launched on the 6th April 2021 with major banks including Barclays, Lloyds and Virgin Money partaking.
The loans are intended to be used for any legitimate business purpose. Including growth and investment, with loans of between £25,001 and £10 million available per business.
Extension of the business rates holiday
Another key announcement in the Budget was that the business rates holiday would be extended until the end of June 2021, following which rates will be discounted.
The VAT cut to 5% for businesses in hospitality and tourism will also remain in place until September, after which it will increase to 12.5% and will only return to 20% in April 2022.
My business is struggling: What are my options?
Although many measures laid out in the 2021 Budget offer a much-needed helping hand to UK businesses. For some it will be too late.
If this is the case, you will need to know what options are open to you.
If your business is struggling with cashflow or is insolvent, meaning it can’t pay its debts, one option for business recovery is administration. This can help to rescue a business by protecting it and its assets from claimants during a process of restructuring.
When a company enters into administration it is protected against legal action for 8 – 10 weeks. Once an administration order is approved, a licensed Insolvency Practitioner who operates as the official administrator is appointed to oversee the company’s operations. They will draw up a recovery plan which must be approved by the majority of the company’s creditors.
Company Voluntary Arrangement
Another option open to insolvent business looking to turn around their struggling business is Company Voluntary Arrangement (CVA.)
A CVA is a voluntary legal insolvency process that allows an insolvency company to come to a formal agreement with creditors to pay back a portion of their debts over time. This usually lasts between 3 – 5 years.
A CVA is a good option for businesses that have a real chance of recovery and means they will avoid going into liquidation.
Again, this is a legal process and therefore an Insolvency Practitioner must be appointed to carry out and oversee the process.
The Insolvency Practitioner will work with the company directors and their accountant to draw up a proposal on how the company will pay creditors back and a schedule under which they will do so.
Creditors’ Voluntary Liquidation
However, if your company does not have a sustainable future and can’t restore profitability, Creditors’ Voluntary Liquidation (CVL) is likely the best option for you.
This is a voluntary process applied for by directors and shareholders when a company can no longer feasibly operate and is insolvent. In this case, the company will be liquidated and dissolved. Meaning it will cease to trade and operate and its assets will be liquidated in order to pay by creditors what they are owed.
This is usually the best route for companies that owe money to creditors and wish to avoid being forced into compulsory liquidation if they fail to pay back their debts.
Let Clarke Bell help with the next steps
If you are unsure of what the right course of action is for you, your company and creditors, Clarke Bell are here to help make the path ahead easier.
Simply give us a call and our team of experts will work closely with you to find the best solution going forward.