- 19 Jun
What Is Going To Happen Next In The UK
This is my personal view on what is going to happen next to UK businesses and the economy in the UK.
So, following the pandemic, we are starting to see a gradual easing of the lockdown, and a gradual return to work for most people. There are likely to be further relaxations in the lockdown conditions, however there will remain an impact on UK businesses until we either have a vaccine, an effective treatment or the number of cases has dropped to a negligible level.
Having said that, I am hopeful that we will see something of a bounce back once the lockdown conditions have been largely lifted. At the beginning of the year we were seeing some positive signs in the UK economy, I hope that this has only been paused with the crisis. However, I am also concerned that there will be a wave of struggling businesses that have merely postponed their financial issues, with the government's credit measures. Also, forecasts in Guardian (15/06/20) suggest that the UK economy will shrink by 8% in 2020, with a full recovery unlikely until 2023 - let's hope it the UK can do better than that.
Government Credit Measures
The various measures implemented by the Government have helped many businesses and individuals stay afloat during the crisis. The support has been unprecedented. The grants provided to retailers and the self employed will no doubt inject some liquidity in the economy, however, where this comes at the loss of several months income it is unlikely to do much more than plug the gap, and I am sure it will fall short of that in some cases. Furthermore, the nature of the support has included significant provision of loans and deferment of liabilities e.g. VAT and personal tax payments.
The effects of this are likely to be that people will struggle when the repayments finally start to fall due. This may move the problem forward, into the first quarter of 2021 for the tax deferments and beyond for the loans. However, at some point those VAT liabilities and personal tax bills will have to be paid. This is going to be difficult where several months trading have been lost or hampered. There are unlikely to be a few boom months to make up for those losses, before the repayments hit. Thereafter, the loans will start to fall due, after the initial year's grace period. In many cases those loans will have had to be spent on just keeping things going. It seems unlikely that we are about to head into a period of rapid growth in the economy so I can see the UK continuing to struggle forward, for some time to come.
We still have plenty of funders ready and able to help SMEs that are struggling to meet their obligations. Utilising the book debts of a company to unlock capital is often overlooked. This can be an untapped source of capital, so I can see a role for invoice finance companies to help support UK SMEs through these issues.
This will be the next hurdle to overcome. In the same way that Brexit uncertainty had been a destabilising force for several years, as the impact of coronavirus moves away from the foreground over the next few months, the looming end of year deadline to achieve a trade deal with the EU will come into focus. If that cannot be agreed by the end of this year, the UK faces the possibility of the dreaded "no deal" exit that has been feared for so long. The pandemic will have hampered these negotiations, but I sincerely hope that another rabbit can be pulled out of the hat last minute, to avert a further blow to the UK economy. My hope is that the situation will be resolved in advance of the deadline.
Now could be a good time to ensure that your business has the protection against bad debts that will help you survive any debtor problems as a result of all these economic issues.