A fresh tightening of coronavirus restrictions threatens to force businesses back into hibernation just as some were beginning to see light at the end of the tunnel. By contrast, bankers specialising in restructuring struggling companies have been so busy, they are calling their old bosses out of retirement.
“You’re seeing a lot of old friends who disappeared in 2012 suddenly reappear again on the screen to say hello,” says Jo Windsor, an insolvency lawyer at Linklaters. “A lot of the old hands are being pulled back in by the larger banks and institutions.”
So far, the huge wave of insolvencies predicted earlier in the crisis has not arrived. Government support for the private sector in the form of furloughing, state-backed loans, business rates holidays, grants and tax deferrals has staved off a surge in firms going bust.
Official figures released last week show the number of company insolvencies in August was 43pc lower than in the same month last year.
In a health warning accompanying the numbers, the Insolvency Service said that factors such as a temporary ban on winding up petitions are likely to be driving the low number of businesses going under, despite the wider economic damage caused by the Covid pandemic.
“The stimulus and support is definitely doing its job in avoiding a tsunami of unnecessary or unplanned corporate challenges,” says Geoff Rowley, chief executive of FRP Advisory, the restructuring and financial firm that has won work on the administrations of Debenhams, Bonmarché and Carluccio’s.
The dearth of formal company insolvencies is masking the pain companies are already enduring. But that could change very quickly with the state due to stop paying the wages of furloughed workers at the end of October.
Limits on group socialising under the “rule of six” regional coronavirus restrictions and the threat of a second national lockdown will make it even tougher for businesses on the brink to avoid the worst.
“I think there will be a spike in formal insolvencies towards the back end of this year among those businesses that have been holding on and can’t carry on [and] a gradual increase in formal insolvencies over the next two years,” says Carl Jackson, chief executive of Quantuma, a restructuring firm.
Advisers say they are already extremely busy helping firms with “informal” restructuring through negotiations with landlords, cutting jobs and other measures to cut costs.