But leisure and hospitality businesses continue to feel the brunt of the crisis.
The number of companies going into administration during Q3 2020 remained near historic low levels, as the extension of government COVID-19 support packages continue to help stave off an anticipated wave of corporate collapses.
Analysis of notices in the London Gazette by KPMG’s Restructuring practice showed that 246 companies went into administration during the third quarter of the year – down 10% on Q2, and a significant fall of 39% when compared to the same period in 2019. The last time numbers were this low was in Q4 2015 when 243 companies went into administration.
Blair Nimmo, head of Restructuring for KPMG in the UK, said: “While the latest ONS employment data indicates that more and more businesses are having to take tough decisions around their employee base, it nevertheless appears that the various government financial support packages, coupled with the extension of commercial rent protections, do appear to be achieving the aim of providing businesses with a vital lifeline.
“The question remains, however, whether the can is simply being kicked down the road. We know that as the support schemes start to unwind, and the repayment of loans, tax arrears and rent starts to kick in, cash flow is going to come under significant pressure once more. As it stands, the moratorium on lease forfeiture ends on 31 December, so it could be a very difficult start to the new year for those who have delayed rent payments thus far.”
Blair Nimmo added: “Of course, there are some sectors which are perhaps outperforming expectations. For instance, there are signs that the used car market is driving sales for motor retailers, while companies across the tech and life sciences industries are also trading positively.
“But for those for whom trading continues to be challenging, the need to maintain strong financial discipline will be paramount. Regularly updating forecasts, contingency planning under varying assumptions, maintaining cash preservation measures and understanding the levers available, as well as full and regular stakeholder management are all absolutely key.”
Despite corporate insolvencies remaining low across the UK and the temporary boost provided by the Eat Out To Help Out scheme, the well-publicised headwinds facing the leisure and hospitality sector are having a devastating effect. A total of 48 companies across the sector, including the Azzurri and Byron restaurant chains, entered into administration during Q3 – a 41% increase on the 34 seen during Q2.
Will Wright, head of regional restructuring at KPMG, said: “A second wave of hospitality closures, coupled with the introduction of the 10pm curfew, comes as a real body blow to a sector which is still bruised from the impact of the initial lockdown. Trying to sensibly forecast and plan for the months ahead is nigh on impossible when the sands are constantly shifting, and I think it’s now inevitable that we will see further insolvencies across this sector in the months ahead.
“As further regional restrictions kick in, businesses need to think nimbly. Those who can pivot and flex their operating models in line with restrictions – for example, by switching back to takeaway and home delivery - and who can maintain a grip on cash stand more than a fighting chance of survival. But it will not be easy.
“Do not be surprised if we see businesses which have already undergone some form of financial or operational restructuring, whether via a CVA or by putting parts of their business into hibernation, take further action.”
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