Andrew Haslam, partner in the restructuring advisory team at specialist business advisory firm FRP shares his view of the situation on the ground in the North-East for businesses in distress.

MONDAY saw the publication of the Federation of Small Businesses (FSB) quarterly Small Business Index, which paints a clear picture of a business community under pressure.

According to the FSB’s research, just under five per cent of respondents to its study said they were planning to bring the shutters down on their operations in the next 12 months – a record number for the Index, and one that, when extrapolated to the wider UK business community, suggests the country could lose at least 250,000 small firms by the end of the year.

Over the past ten months, the North-East’s business leaders have worked hard to stabilise their operations in the face of significant challenges – challenges that respondents to the FSB’s research will also likely share.

Sequential national and local lockdowns have forced some, particularly those in the hospitality sector, to pivot or mothball their operations. Meanwhile, others have had to contend with significant supply chain disruptions and fluctuations in customer demand.

As we start a new year – and a new lockdown – many North-East business leaders will be considering how they are prepared to navigate in the months to come. Here, there will be some key factors to keep in mind.

With new restrictions now in place, it is essential that management teams take the time to refresh, or develop, a 13-week cashflow forecasting model, conducted at as granular a level as possible.

While ongoing uncertainty and rapidly changing conditions will make this process difficult, having a clear understanding of a firm’s cashflow position will help better anticipate where potential pressure points lie.

Over the course of the pandemic, many businesses in the region have made quick and effective use of the support measures available – be it furloughing staff through the Coronavirus Job Retention Scheme (CJRS), accessing funds through the Coronavirus Business Interruption Loan Scheme (CBILS) or Bounce Back Loan Scheme (BBLS), or deferring VAT payments.

These have so far helped many businesses to stay afloat. However, leaders must keep in mind the limits of this support, and carefully consider any liabilities they have incurred through it – as it stands the CJRS is set to close at the end of April, and businesses will need to repay any money borrowed through schemes such as CBILS or deferred through the VAT scheme.

The closure of support schemes and the start of repayments could create a crunch point for cashflow. However, factoring this into plans now can help businesses prepare to manage any potential pressure, and enable them to start taking steps to address the potential impact on their operations.

Above all, where management teams identify cracks in their operations, it’s important that they seek advice as soon as possible. In our experience, creditors are more likely to restructure debt at the early stages of difficulty, while quick and proactive action only maximises the time a business and its advisers have to review the available options and find the best path forward.

North-East businesses will likely continue to face challenging conditions for some time to come. However, proactive planning now can help ensure firms are on the strongest possible footing for whatever lies ahead.