“Surviving difficult times calls for difficult decisions,” said Ian Carrotte of ICSM Credit, “but to survive the coronavirus crisis business needs to take action now. Act early and hopefully those in business will be able to pick up the pieces in the summer with their operation still intact.”
His words appear to have been heeded by many in business as the likes of Burger King, Carluccio’s and Yo! Sushi are among hundreds of firms making the difficult call to withhold their rents while others are putting up the shutters to wait for the economic storm to pass.
Rents withheld by closed traders
The Financial Times reported today: “Alasdair Murdoch, chief executive of Burger King UK, said he would skip rent payments due on the chain’s more than 500 British restaurants to free up funds to pay staff, after the government announced that those who did not pay would not forfeit their lease. Landlords are locked in frantic negotiations with shops and restaurants ahead of Wednesday — when quarterly rents are due across British high streets — after the government ordered pubs, restaurants and many other businesses to close at the end of last week. Many retail and leisure companies, which typically operate on thin margins, said that with no revenue coming in, paying rent would mean they could not pay staff until the government’s support for wages came through.”
Many of the larger retailers have said they will continue to pay staff while their doors are closed – although it is thought this is on the proviso they are able to access the promise of part of the salaries paid by the Government. And it hinges to a certain extent on how long the crisis continues. Clearly if it is a year then all bets are off.
Builders carry on but DIY stores close
In construction and inline with the Government shutting stores Travis Perkins, Jewson, Howdens and Huws Gray Ridgeons are among builders’ merchants closing their doors. The board of directors of construction outfit Kier have agreed to take a 20% pay cut for three months according to Construction Index but have warned the workers that they will also have to take pay cuts and is offering unpaid leave for staff. A row has broken over construction workers who have to travel in crowded trains or vans to work and then have to share canteens, toilets and other facilities. Clearly it is not possible to social distance in those circumstances but it has at present been left up to employers to decide if it is safe to keep working.
Printers see orders cancelled
Many printers are weighing up whether to close during the emergency or to keep on printing. Print Week’s Richard Sturat Turner reported: “The majority of UK printers appear to have remained open for business, albeit often with adapted operations and having to cope with a swathe of cancelled jobs.” However that was four days ago – a long time in the present crisis – and since then the free newspaper in London City AM has stopped operations in part due to the fall off in the numbers of commuters who are its main readers. Although free newspapers and most print publications are considering the immediate future as advertisers pull their ads.
Laying off workers
Letting staff go is one the hardest tasks given to any management as it inevitably leads to bad feeling and potentially problems in the future to rehire workers. It also brings a drop in moral in those left as a skeleton operation to keep the business alive. The biggest shedders of staff are those who employ workers on zero-hours contracts. They include temps, hospitality workers and supply teachers who are often employed via an agency or an outsourcing firm. One such outfit is Aramak who dismissed their contract workers by text this week. The only option for the employees is to seek job seekers allowance or find a new job.
Government loan scheme for companies
Small and medium-sized businesses (SMEs) with an annual turnover of less than £45m can apply for an interest-free loan of up to £5m to help them through Covid-19 related difficulties. The government will provide a grant payment to cover the interest and initial fees for the first 12 months, and will guarantee 80% of the loan amount to give banks and financial companies the confidence to lend. Under the scheme, which will initially run for six months, businesses will be able to borrow for up to six years. They will be liable to repay the money in full – the guarantee is for the lenders, not the borrowers.
Ian Carrotte said the wheels of Government work slowly and getting one of the loans may not be quick. He said: “Firms will have to prove that they are viable businesses which have been trading successfully, but just need extra support to deal with short term difficulties caused by the current disruption. Some firms may not be successful so don’t get your hopes up that this is not a panacea.”
Diversify into a new area
There has been much coverage of F1 teams working in collaboration with the Government, Innovate UK, the High Value Manufacturing Catapult team and UCL and University College London Hospitals to develop ventilators for the NHS. But there are other options for less glamorous companies to keep working during the crisis.
Fiat’s car plant in China is to start making face masks while motor car plants in the UK and Europe have agreed in principle to start making ventilators although gearing up to manufacture them isn’t an overnight operation.
A lifeline has been offered to hotels, restaurants, cafes and pubs by the Government in the form of take-away food. While Greggs and MacDonalds have close many companies in the hospitality industries have swiftly converted part of their business to supply groceries and hot and cold take-out food and drink. Other firms such as newsagents who are allowed to remain open have increased their product range to help supply the demand for food, toiletries and cleaning products.
Ian Carrotte said: “Necessity is the mother of invention as the old phrase goes as it has never been more true in these times. My message to firms who have been forced to close is to look at what resources you have and consider an alternative use for them. Vans used to deliver print could be drafted into the logistics sector while there’s no reason why a café can become an impromptu food shop as they have the supply chain already in place.”
He said one of the best options for businesses was to join ICSM Credit to get inside information from members on which businesses were not paying their invoices and so to avoid. He said: “The best safeguard is to protect your credit control and that’s where ICSM Credit can help.”
ICSM Credit
For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.
To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com
For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk