Life as an Insolvency Practitioner during lockdown

As the UK continues to nudge itself out of lockdown to try to repair five months of economic struggles, CVR Global’s Adrian Hyde reflects on life as an IP during lockdown, and considers what the long-term ramifications might be for parts of the UK economy.

Covid-19 became every debtor’s favourite excuse for not paying – it’s as if an extra box had been added to the standard list of excuses. That said, I would stress that it is absolutely NOT an across-the-board ‘excuse’ – the pandemic has had a devastating effect on many businesses, but some clearly have used it as an excuse. 

But by way of example, a client of ours reached a pre-Covid-settlement with a debtor but as soon as lockdown hit, they asked for a three month payment holiday, so that their next payment was due circa 20 July, on the basis that they have an ownership interest in a Chinese restaurant in London and it is their sole source of income. 

As 20 July neared, they requested a further three month payment holiday.  As we had never received any real detail regarding the restaurant, we said that we would happily consider the request but that we needed some further information; the name and location of the restaurant, a copy of the lease, and the last management accounts.  Within two days they responded saying that they had managed to secure finance from a family member and would recommence payments immediately!  This is not the only example that we have.

In the weeks before lockdown, enquiries were increasing dramatically; professionals in our sector already believed that the country was heading for a recession.  However, in a move to help the UK economy, and its citizens, the Treasury launched a comprehensive package of measures to help ease the pain that lockdown was causing. 

This led the majority of people, individuals and firms to pause, given that they now had a means of getting through the coming weeks and months.  Whether the problems were caused by Covid, or pre-existing, they had been solved at least for the time being.

That Government support – such as the furlough scheme and business interruption loans – is now inevitably tailing off, forcing both businesses and market commentators alike to contemplate what the ‘new normal’ will look like when everyone has to again stand on their own two financial feet.

Inevitably there will be casualties; office space is now being reappraised due to the revelation of video technology – therefore, do we really need as much commercial space as we have? Internet shopping has also grown even more, hitting retail centres and their owners; but where will this end? 

Shopping centres and large high-grade office landlords are the bread and butter investment for pension funds; they have always been the safe, dependable, resilient investment that delivered steady long-term growth and dividend streams. 

We are a long way off understanding the long-term impact that this will have – what will it mean for annuity rates and investment yields?  What will it mean for pensioners and those retiring in 10 to 20 years’ time?

And what of the residential property market – there are growing numbers of redundancies, most significantly in retail – yet the property market is currently flying high, helped by the Government’s stamp duty holiday, but nevertheless performing well.  

Is the Covid effect going to be to drive a bigger wedge between the property owning and property renting sections of the population?  Is the inevitable move towards less office space and more working from home going to lead to large numbers of offices being converted to residential living space as many commentators have already predicted?  If it does, what will this do for the rental market?  Whilst in theory there will be a significant increase in rental stock, will there be a change in the law to allow pension funds to retain their interest in these properties, or will they be forced to dispose of them, in favour of replacement commercial property investments? 

Many questions remain unanswered because at the moment there are no certain outcomes, but one thing is for sure, we all need to embrace change and become agile in order to emerge from this crisis in better long-term shape.