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The businesses that survive will always be the ones that recognise they have a problem, make a plan and act on it. You need to make a plan.

The UK Government have also put a lot of measures in place to help such as:

  • The employee furlough scheme which has been extended to the 31st March 2021. This pays 80% of wages and you can ask employees to reduce pay to this level.
  • Coronavirus Business Interruption Loans or CBIL’s.
  • The Bounce Back Loan of up to £50,000.
  • Small businesses rates grant funding.
  • Retail, leisure and hospitality grants of £25,000.
  • Business rates relief for retail, leisure and hospitality businesses in 2020/21.
  • Deferral of the Vat in the second quarter of 2020.
  • Increased support from HM Revenue & Customs on Time to Pay.
  • You can also defer capital payments on loans and ask landlords for help deferring rent.


The highest expense for many businesses is payroll costs and their employees. You cannot normally just lay off staff for a period of time (unless that was specifically in their contract) so to do that you have to make them redundant. The cost of redundancy can be insurmountable to a business already facing cash flow problems. Employees are also due notice pay usually based on a weeks’ notice for every complete year worked. This is limited to a maximum of 12 weeks pay for 12 years’ service or more.

In addition if you have more than 20 employees and you are considering redundancies you have to enter into a 90 day consultation period and submit form HR1 to the Insolvency Service.

The new UK Government backed furlough scheme has helped. This reimburses 80% of the salary or wages costs of furloughed employees. You can ask employees to accept just 80% pay as well.

There is a lot of damage being done to businesses in the loss of these employees and their skills and knowledge and the concern is whether they will ever come back. There is an incentive to be honest and talk to staff collectively asking them to help and agree a plan to help the business to survive.

If you are going to talk to employees about redundancies or a permanent downsizing I would recommend you take legal advice first.


The overall objective needs to be to work out how to get back to profit. This means doing a weekly or monthly budget based on the new environment for your business. The issue of cash flow comes later.

The first issue is to establish what are your monthly sales going to be going forward? Not only will you have lost orders or customers but also the ones that you do keep could well have cash flow problems and so your trading terms may be extended.

The second stage is to establish your overheads and what can be reduced. For example, will your landlord allow a short-term rent reduction? Usually a sensible landlord will allow this for a short period as it is better than having empty premises. Business rates may be able to be reduced to nil in 20/21 if you qualify under the new UK Government business support rules.

I have discussed employees above. Start with reviewing the written contracts of employment you have in place and consider redundancies as well as asking your team to accept pay reductions or even lay offs beyond any furlough if you need to close or downsize for a while.

You need to see what costs can be saved and work out if you can get the overheads to be less than sales. If you can not do that then you really do have a problem.

Third – you need to look at cash flow. Can you raise money to put into the business and can you make a claim of the new Government grants available? This includes the £10,000 for small businesses that previously qualified for Small Business Rate Relief and £25,000 for those with a rateable value below £25,000.

You can defer some costs by talking to suppliers about make smaller or delayed payments. In my experience suppliers would rather have something smaller each week or month than nothing at all. You can talk to HM Revenue and Customs about a time to pay agreement as well in order to defer PAYE and VAT.

There is also a new UK Government backed Coronavirus Business Intervention Loan scheme which is bank charges free and interest free in the first year.

IF ALL ELSE FAILS yo need a back up plan - this is it

Company or Individual Voluntary Arrangement may be worth considering. This stops creditors taking action on the current debt (suppliers, bank loans, taxes) and gives you 3 to 5 years to pay some back by instalments and keeps the business going.

Another option may be to close and liquidate. This does trigger the UK Government Redundancy Payment Service fund for employees who can then claim arrears of pay, notice pay, redundancy and unpaid holidays (subject to caps).

Administration may also be an option as a method to very quickly downsize a business into a smaller, more profitable form that is perhaps sold on to a new entity.

If you want some advice please email me

David Kirk


David Kirk ACA FABRP



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David Kirk

Licensed Insolvency Practitioner