Hi
As we move into December, suppliers may be tempted to offer credit to businesses that promise payment in the New Year from their Christmas takings; but will those payments be forthcoming?
A report from Deloitte this morning states:
This year has seen a surprising fall in the number of corporate failures in many advanced economies, including the UK. Figures from the UK Insolvency Service show insolvencies in October were 42% lower than a year ago despite a huge contraction in the economy. The fall in insolvencies reflects the extraordinary financial support extended to the private sector, a reduction in
enforcement action by HMRC and the courts, and some temporary protections from creditors that expire on 31 December. As support unwinds insolvencies are likely to rise. The government’s Business Impact of COVID-19 Survey highlights the difficulties facing some corporates. It shows that 8.4% of UK firms have less than one month of cash reserves and 14% of business have little or no confidence they will survive until February. An analysis produced by colleagues in Restructuring Services estimates
that insolvencies could rise by almost 60% in the first half of next year, matching the scale of the increase experienced at the height of the global financial crisis in 2009.
We recommend caution in extending credit to customers in December; given the generosity of government schemes and loan guarantees this year, viable businesses should have cash available to pay in advance or on delivery.
Don't catch a cold in the New Year and become one of 2021's insolvencies.
Noel Guilford