How can Brighton businesses get back on their feet after the COVID-19 lockdown?

As we begin to take stock of the economic damage caused by coronavirus it is a sobering thought that many businesses in Brighton and around the UK, which only a few months ago were thriving and prosperous, are now struggling to survive.

Burgeoning unemployment is already taking hold despite the government’s extensive support packages for businesses across the board, and the general outlook is for long term difficulties rather than the hoped for ‘bounce back.’

Chancellor Rishi Sunak, recently predicted “a severe recession the likes of which we haven’t seen,” so what can businesses in Brighton and across the region do to get back on their feet after the coronavirus lockdown, and move on through this bleak period?

Positive cash flow is key for successfully navigating these uncertain times and underpins recovery for all types of business. Without sufficient cash to pay the bills it is easy to enter a debt spiral that can ultimately mean the end for businesses as they become exposed to the threat of legal action by creditors.

The government’s loan schemes, including the Bounce Back Loan and CBILS, enable eligible businesses to secure interest-free finance for 12 months. It is important where possible, however, for each business to consider whether these funding options really are appropriate for them in the long-term.

There are alternatives to the government backed loans, which might suit some businesses better in terms of flexibility and ease of access, one example being invoice finance where funding grows along with sales.

Clearly, this may not be appropriate for all businesses, but it is important to think strategically and look ahead 12 months or more when deciding on the action to take.

As business owners access government loans, defer tax and rent payments, and generally take the actions necessary to stay afloat now, it is worth considering how their businesses will cope when these financial obligations finally have to be met.

Whether that is in three months’ time or 12 months, at some point in the near future commercial landlords will request their rent payments, HMRC will demand that tax deferments are brought up-to-date, and the interest on government-backed loans will need to be paid.

These financial obligations, although crucial at the time they were taken on, may be overwhelming for some businesses in the future, particularly if trade has not picked up by then and cash shortages are a continuing feature of day-to-day operations.

There are fears that consumer spending habits may have changed irrevocably, and businesses need to take positive steps to address this where possible. For those with larger premises, for example, enforcing social distancing, protecting staff, and controlling visitor numbers, could all encourage customers to return.

In contrast there may be some consumers who are greatly relieved to be able to return to the high street after weeks in lockdown, and they could provide a much-needed boost to retail businesses and the local economy.

It is worth remembering that if businesses are approaching insolvency, it does not necessarily mean they will have to close down. Debts can be restructured within a formal, legally binding agreement called a Company Voluntary Arrangement (CVA), and for eligible businesses this can allow them to trade out of financial difficulty.

If you would like to find out more about this and other ways to get your business back on its feet after the COVID-19 lockdown, you can arrange a free consultation with partner, Jon Beard, at your local Begbies Traynor office in Brighton.

If you want to contribute to the Chamber blog, contact us on hannah@brightonchamber.co.uk