Economic Insight

David Hudson, London head of corporate insolvency at accountancy firm Baker Tilly, explains why it’s recovery, not recession, that breaks many businesses


David Hudson, London head of corporate insolvency at accountancy firm Baker Tilly, explains why it’s recovery, not recession, that breaks many businesses

David Hudson, London head of corporate insolvency at accountancy firm Baker Tilly, explains why it’s recovery, not recession, that breaks many businesses

This has almost been a recession without insolvency, except for a number of high-profile cases 18 months ago, such as Woolworths and Lehman Brothers. Things are starting to change now: we are receiving more enquiries than we were three or four months ago.

One reason is that businesses have deferred payments to landlords, suppliers and creditors, as well as delaying tax payments through HM Revenue & Customs’ Time to Pay scheme. In addition, banks have not been forcing the issue where debtors are concerned. In fact, they have been extremely supportive compared with past recessions, when they were much quicker to bring in an insolvency practitioner.

Landlords have tended to be accommodating where businesses have struggled to pay rents. That’s partly because there’s no point in forfeiting the lease on a unit when you can’t find another tenant and you would have to pay empty property rates.

The problem comes when the market picks up. With more interest from businesses in renting premises, landlords’ attitudes might change towards existing tenants who have not paid rent in full. As for HMRC, though they are likely to be reasonable, it is unlikely that they will stretch payment terms as much as they have done.

Many businesses are still overgeared, and some will face urgent working capital issues. Conversely, those that have been run sensibly, retained reserves and not spent profits will find themselves in a very strong position. 

Nick Britton

Lexus Ernser

Nick was the Managing Editor for growthbusiness.co.uk when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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