While businesses across the land are being thrown a lifeline by the Government’s comprehensive Covid financial package, not all will be able to recover at an equal pace, if at all, warns CVR Global’s Adrian Hyde.
The Coronavirus has shaken businesses to the core and, understandably so, kept many owner-directors awake at night wondering how, and if, they are going to survive.
Those fears were largely calmed by the Chancellor Rishi Sunak thanks to the furlough scheme, business interruption loans and the relaxation of wrongful trading rules. However, this temporary financial aid will be a stay of execution for many directors unless they get an immediate grip of what is negatively – and positively – impacting their cash flow.
While a Director may see a healthy change in their outgoings thanks to the Government’s furloughing scheme, this is only temporary, and other more permanent avenues should be pursued to ensure that, once normality returns, the business has a stronger chance of surviving and thriving.
Can you use this down time to strengthen your relationship with your landlord and negotiate a lower monthly rent? What would your cash flow look like for the rest of the year for different scenarios? Could your business diversify into other areas? These are all serious areas for business owners to explore over the coming weeks so that once the government’s financial aid subsides, their company stands firm.
One sector which will be significantly impacted in the longer-term from Covid-19 is travel. From my own dealings with colleagues and clients, I think we have advanced in our use and appreciation of technology by two years in the space of just two weeks. After this crisis I think more people will use video technology rather than catching the train or plane for a face-to-face meeting, and the travel sector needs to be ready to react to this,
I was part of an R3 panel that helped to answer government questions to aid their research around relaxing the existing insolvency laws. It asked us to consider variations to the previously proposed moratorium, possibly a relaxation of certain requirements. My view was that it would amount to a short term quasi administration, and could help a wide range of businesses giving protection whilst they take urgent steps to improve their position or restructure, and could be a very positive move in the current climate.
Any relaxation of insolvency laws is not a viable option in the medium to long term, as it would inevitably encourage reckless trading in some quarters, leaving many creditors out of pocket and would damage the wider economy.
What we need is a short pause, to help everyone get to grips with their situation and try to work a way through it, with the help of their advisors, and with support from the government.
These next three months will be pivotal for the future of many SMEs, and now is the time to map out a blueprint for recovery.