RSM will call on Government today to urgently consider extending the temporary coronavirus regulatory relief – the Corporate Insolvency and Governance Act – to three months beyond the date on which it is currently set to end.
The leading audit, tax and consulting firm says an extension will allow consumer-facing businesses more time to bolster their debt positions and operating models ahead of an anticipated uptick in trading in the crucial lead up to Christmas.
In an open letter to the Right Honourable Rishi Sunak MP, and on the eve of the parliamentary Summer recess later today, RSM will highlight the likely fate of ‘vast swaths’ of UK businesses if the little-talked-about measure in the form of the Corporate Insolvency and Governance Act easement, which is allowing consumer-facing businesses to operate and survive, is not extended beyond 30 September 2020 – it’s current cut-off.
The 30 September will see better known measures end, such as the rent moratorium, Coronavirus Business Interruption Loan Scheme and the last embers of the furlough scheme. But it is the Corporate Insolvency and Governance Act, ending on the same day, that brings the spectre of directors becoming personally liable for debts if they are found to be trading whilst insolvent from 1 October.
Paul Newman, partner and head of leisure and hospitality at RSM, comments: ‘Make no mistake - sticking to the current timeline will be the death knell for vast swaths of consumer-facing businesses. But if these companies can be given a chance to take advantage of an economic upturn, and importantly the Christmas period, the government needs to extend the Corporate Insolvency and Governance Act easement. By doing so, it will back these businesses and give them a chance to extend their recovery period. Without it, most simply will not survive.
‘A three-month extension may also allow them the time to find more permanent restructuring of their debt positions once their new operating models are better known. Failure to do so will expose all the government’s generosity of the Summer months and render it worthless.
‘No industry has been more affected by the Coronavirus pandemic than the consumer facing sectors. The Chancellor’s measures have given the industry much need breathing space and the opportunity to be able emerge in a Covid-secure way as lockdown relaxes. The UK’s high street retailers, casual dining outlets and travel businesses are the front line of our economy, with industry and financial markets reliant on consumer spending. A three-month extension could - just could – be the life-blood these businesses need to allow them to survive and contribute to the UK’s wider economic recovery.’