What is abundantly clear is that the much-welcomed steps introduced and maintained by the Government have prevented large scale insolvencies and therefore job losses. The official insolvency statistics for 2020 show that there was a reduction of 27% on underlying company insolvencies when compared to 2019. Data compiled by us from advertisements placed in The London Gazette shows that trend continuing in 2021. There were 631 adverts for the appointment of Administrators and Liquidators in January 2021 compared to 843 in January 2020. Although this rose to 823 in February 2021, the numbers were significantly lower than in February 2020, at 1,532.

Common sense would dictate that there will have been a considerable number of businesses propped up artificially by these support measures, predominantly Furlough, the VAT deferral scheme and the Bounce Back and Coronavirus Business Interruption Loan Schemes. When the Furlough scheme is withdrawn and businesses must start repaying the VAT and loan payments, one could reasonably expect this to push businesses over the edge resulting in insolvencies and redundancies. Add into the mix the ability of creditors to issue winding up petitions against customers and we can see how the pressure will begin to build.

The Government has continually extended the Furlough scheme and it would not surprise us if it was extended once again, but how long should we keep delaying what many feel is inevitable? No one wants to see UK companies suffering, but at some point businesses will have to deal with an unsupported, ‘real world’ environment. There is a strong possibility that we are doing the owners of some non-viable businesses a disservice by creating a false sense of security which may lead them into greater and more prolonged difficulty.

Return of the Zombies

How’s your memory? In the financial crisis of 2008 many predicted widescale insolvencies. In the event, however, the numbers were suppressed by Government assistance, creating what were at the time labelled Zombie companies, contributing little to the economy, making very little profit and paying little tax. Are we going to see another raft of zombie companies as a result of the continuing support and leniency given to businesses affected by the pandemic? Some may see them as a drain on the economy, stifling economic growth, others simply a method to keep rising unemployment figures out of the headlines to avoid tackling the reality of the underlying issues.

Rishi Sunak may not have all the answers tomorrow, but let’s hope he’s polishing his crystal balls to give us a glimpse of things to come!