Insolvency and restructuring trade body R3 is urging directors of Covid-hit businesses to use the final month of the Government’s furlough scheme to plan for the future and address any financial issues they face.
The furlough scheme ends on 30 September, and employers have until 14 October to claim wages for staff who have been put on furlough during that month. Under the initiative, the Government will pay up to £1,875 per furloughed employee to cover 60% of their wages throughout September, with employers required to contribute 20% of the employee’s wages, and having the option of contributing more.
R3 is calling on company directors to use this time to review their business’s financial position and to seek advice about the options open to them if they’re experiencing any financial issues.
“Businesses have another 30 days where Government will underwrite a large percentage of their wage bill. Directors need to use this time wisely, explore their options for resolving any issues they face, and develop a plan for how they’ll address them,” R3 Deputy Vice President Nicky Fisher said.
“In particular, anyone seeing signs their business is financially distressed – which can include problems paying wages, being unable to pay suppliers on time, or issues with cashflow – needs to seek advice from a qualified source before the problem gets out of hand.
“Talking to someone about the problems your business faces at an early stage means you have more potential solutions open to you and more time to take a decision about how you move forward. It’s very hard to have that conversation, but starting it early generally leads to much better outcomes for you and your business than if you put it off.”
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R3 has developed a free guide for company directors, which outlines their duties under the Companies Act, the common signs of business distress, and the full range of restructuring and insolvency options that are available to distressed companies.
Nicky Fisher continued: “These are far from normal times. The pandemic has disrupted trading for nearly a year and a half, forced around 1.6m businesses to borrow more than £79bn from the government and, at the peak of the pandemic, furlough nearly nine million staff. The scheme has undoubtedly saved tens of thousands of businesses and jobs.
“We know there are a large number of company directors who are worried about the future – especially with the furlough coming to an end and payments due on the loans the Government made available. That’s why we developed this guide – to give them all the information they need to identify the signs of business distress, and insight into what options are open to address it.”