Firms ‘hang on by their fingernails’ as Covid loans fall due

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Firms cling on as support ends

Retailers, pubs and restaurants in particular hoped a fully fledged spending boom at Christmas – spurred on by families and friends desperate to make up for last year’s lost time – would restore their fortunes and eat into the debt mountain.

But the economy is not yet fully recovered, omicron trashed Christmas party plans and support is being withdrawn already, meaning companies risk having to bear this burden with little extra help.

Furlough is over. Companies like Slaney’s are already making loan repayments, and more will start soon as their year’s grace comes to an end.

The VAT break for hospitality is being withdrawn.

A moratorium on winding up orders ended in September, but there are still restrictions on filing.

Business rates ramp up further from the end of March. At the same time the moratorium on the eviction of commercial tenants ends, to be replaced with a new arbitration system. 

Even before omicron spoiled the festive season, the Bank of England warned these extra costs could threaten businesses.

Chief economist Huw Pill has been upbeat on the state of the recovery, but warned that “the fly in that more optimistic view is… the end of various schemes, which are delaying winding-up orders and other insolvencies,” he told the Treasury Select Committee last month.

“If that shoe is to drop at some point over the next few months, we might see unemployment rise as a consequence of microbusinesses going through that process.”

Julie Palmer, at insolvency group Begbies Traynor, says she is starting to notice a pickup in terms of signs of distress among businesses, particularly since the courts reopened, enabling creditors to take action on debts.

Companies face wave of collapses

Insolvency numbers are still below their pre-Covid levels, but she has identified 800,000 companies which are feeling the strain.

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