Gareth Latimer, Director, Restructuring, Grant Thornton Ireland
Normally January is a time for reflection on the year just passed and optimism for the year ahead.
It is hard to describe the events of 2020 without using the clichés of “a year like no other” or “a once in a lifetime event” but they have never been truer. In years to come, students will be studying the social, economic and political implications of 2020, but alas, my school days are well behind me!
As a professional working in the restructuring environment, it has been a very strange time. Some might look at the headlines from the retail sector and the collapse of the Arcadia Group, Debenhams, and many other high street names and think that the insolvency experts have never been busier, but this has not been the case.
The economic fall-out from the pandemic is estimated to have reduced the UK economy by circa 10-15% in 2020, with an associated rise in unemployment. It is also estimated that it will be at least 2022 before the economy is back to pre-COVID levels.
However, even with the current picture of the High Street and the huge impact of the lockdowns on the hospitality sector, it could be argued that the situation in early 2021 could be much, much worse.
The Job Retention Scheme and support for the self-employed have slowed the rise in unemployment. The grants, loans and various tax deferral schemes provided by the government have also provided some much- needed support for businesses.
The question that everyone is asking is…what happens when the government supports end and businesses have to start paying back their loans?
Some would argue that due to lockdown restrictions and the move to home working, consumers will have surplus cash to spend, as was seen during the “Eat Out to Help Out” scheme in August.
Therefore, it may be the case, that once the vaccination programme starts and allows for a phased return to normality, that consumer demand will bounce back and the economy will recover. However, it may also be the case that the long-term effects of the pandemic are felt for a number of years and so the demand for insolvency experts will increase.
2020 also saw some of the biggest changes in insolvency legislation since the early 2000s, with two new restructuring options now available. Companies can now apply for a moratorium to allow for a restructure of the business or a more formal Court approved Restructuring Plan. December 2020 also saw the return of Crown Preference for certain HM Revenue & Customs debts.
2020 was indeed “a year like no other” ….and it would take a brave person to predict 2021.
For further information or advice, Gareth Latimer can be contacted at gareth.latimer @ie.gt.com
Grant Thornton (NI) LLP specialises in audit, tax and advisory services.