End of support poses huge challenges
Many Scottish businesses will face a “massive challenge” weaning themselves off Covid-19 support schemes when they start to wind down, according to a restructuring expert.
The warning came as figures showed the number of corporate insolvencies in Scotland fell below 2019 levels last year as measures such as the furlough scheme and emergency loans helped businesses hit by the pandemic to weather the immediate storm.
Analysis by KPMG shows that there were 466 company insolvencies in 2020, 25 fewer than in 2019. But Blair Nimmo, head of restructuring for the practice, said the statistics provide a “distorted view of reality”.
He said: “Those businesses that remain in hibernation due to ongoing lockdown measures, such as those in the leisure and hospitality and travel and tourism sectors, continue to accrue liabilities while seeing precious little cash flow into the business.
“At some point, rent and tax deferrals and loans will need to be repaid. The Job Retention Scheme will unwind. Weaning off these support schemes is going to be a massive challenge for many.”
Nimmo said the impact of the Brexit deal was also now being felt. He added that some sectors were seeing an immediate impact on cash and liquidity.
“There have been early signs of disruption across supply chains, particularly on roads and at ports as customs changes, increased paperwork and delays start to have a knock-on effect. This leaves some companies with cash tied up in stock, unable to be dispatched to consumers, but with bills still to be paid.”