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Companies will explore innovative options instead of insolvency, predicts PwC

Aug 05
Tags: PwC
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Companies will explore innovative options instead of insolvency...

Now that we’re in August, it’s time to look ahead to the autumn and what the outlook for businesses will really be like.

Are we heading for a spike in administrations? Julia Marshall, restructuring and insolvency director at PwC, has explored the topic against a backdrop of the coronavirus pandemic.

She has highlighted that many businesses across the UK and in varying sectors have built up a number of liabilities as a result of COVID-19.

These include rent arrears, supplier payments, additional borrowing and HMRC debts, which need to be addressed as normal trading patterns resume.

As firms try to move forward under new circumstances and without the safety net that has so far been provided by the government, balance sheet restructuring and operational turnaround will be enacted.

Such moves will help to streamline their cost base, which is imperative for the survival of businesses in the long term and for the protection of jobs.

Ms Marshall predicts there will be more administrations in the autumn, as a result of the pandemic and the economic downturn associated with it.

One reassuring measure, however, is the new Corporate Insolvency and Governance Act, which will offer a certain amount of flexibility when it comes to negotiations with creditors.

Ms Marshall said: “As a result, we are seeing companies exploring a range of innovative options outside of formal insolvency.

“These include property company restructurings (with or without moratorium) and robust company voluntary arrangements (CVAs) built to fully withstand current and continuing economic conditions.”

She added that CVAs have the potential to be a more sustainable restructuring tool to tackle built-up liabilities and that the focus could be removed from landlords and encompass all stakeholders instead.

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