The recent administrations of rent-to-own retailer BrightHouse and restaurant chain Carluccio’s have delivered a sobering reminder, that despite the extensive financial support being offered by the Government in relation to Covid-19, for some, says CVR Global’s Richard Toone, it is just too late.
Almost certainly the Coronavirus pandemic is the straw that has broken the camel’s back for both of these businesses that have been fighting the same long-term battles that have riddled the high street for years — a scenario that so many other smaller businesses across the country will be en-countering.
For BrightHouse, I think their credit-challenged customer base has always left them as a business susceptible to being affected by defaulted payments, and the closure of their stores because of Covid-19 has exacerbated the problem.
Unfortunately for Carluccio’s, they are in a highly-competitive market where consumers now want more for their money when they have a treat night.
Those nights out have become less frequent for families who have been tightening their budgets in recent years and turning often instead to emerging platforms such as Deliveroo and Just Eat. With this in mind, to suddenly be in a position where their covers cease overnight will have signalled final last orders for them.
I have read statements that over all around 20 per cent of UK businesses may not recover from the Coronavirus crisis, which, unfortunately, sounds plausible and that is without knowing how long the current situation will last.
While BrightHouse and Carluccio’s problems are deep-rooted, the fact that they are two of the first high-profile administrations since the Government’s financial Covid packages shows that whilst the Government assistance is well-received ,there is no silver bullet to the Coronavirus crisis.
The choices business owners make whilst suffering adverse trading conditions caused by the pan-demic could – if they get if wrong – inadvertently end up doing long-term damage.
The furlough scheme is a great initiative whereby 80 per cent of monthly wages up to £2,500 are paid as a grant. Understandably, a great number of companies have jumped onto this scheme and already resorted to furloughing their employees in a bid to slash their outgoings, without maybe considering the remaining 20 per cent of the salary?
I think it would be wrong to simply assume that companies will never have to pay their employees the remainder of their wages, and business owners should seek advice on their obligations for this.
Again, another admirable initiative the Government has formulated is the business interruption loan. They key here is that it is a loan, meaning that while this may keep a business going for now, firms really need to ask themselves how and when they will be in a position to pay this back – so seeking professional advice beforehand is recommended.
These are very serious decisions which should not be charged head-long into. The expression “act in haste, repent at leisure” does come to mind.
The recovery of the UK economy is going to be a marathon, not a sprint, and those who will be in the running will ultimately be the ones who have taken a calm and measured approach about how they are going to weather this storm.