In its recent report, the FSB pointed out that somewhere between 700,000 and 1.1 million people in the UK who pay themselves in dividends, rather than drawing a salary, are currently receiving no help from the government. Tim Close commented:
‘At the moment, the most recent insolvency figures suggest that fewer businesses and individuals are becoming insolvent, but this is effectively an artificial trend created by the government’s ongoing support.
‘In reality, many businesses and individuals have taken on extra debt, and many invoices continue to go unpaid.
‘When we emerge from the restrictions, without additional government support insolvency levels are likely to rise rapidly, which could then have a trickle-down effect on customers, suppliers, and potentially entire communities.’
Looking at previous crises as a comparison, Tim says that most insolvencies tend to occur as the recovery process begins, because businesses have to once again incur costs and begin to settle outstanding debts – including tax charges that they may have deferred.
‘It is clear that the government support has played an essential role in keeping the economy ticking over, but businesses may yet face their toughest times ahead, and they must seek professional advice on insolvency and restructuring if they are experiencing difficulties and wish to continue trading beyond the pandemic,’ concluded Tim.
If you would like advice regarding insolvency or business restructuring, please contact Milsted Langdon’s experienced team.