Insurers must pay many small firms for Covid lockdown losses

Tens of thousands of small businesses will receive insurance payouts covering losses from the first national lockdown, following a court ruling.

The Supreme Court found largely in favour of small firms receiving payments from business interruption insurance policies.

For some businesses it could provide a lifeline, allowing them to trade beyond the coronavirus crisis.

The ruling could cost the insurance sector hundreds of millions of pounds.

The City watchdog, the Financial Conduct Authority (FCA), brought the test case, with eight insurers agreeing to take part in proceedings.

One of the insurers set to make significant payouts is Hiscox, which was challenged by thousands of its policyholders as part of the case.

Richard Leedham, who represented the Hiscox Action Group - on behalf of small businesses, said: "This is a landmark victory for a small group of businesses who took on a huge insurance player and have been fully vindicated.

"What is important now is that Hiscox accepts the Supreme Court's verdict and starts paying out to its policy holders, many of whom are in danger of going under".

Other insurers involved in the test case are Arch, Argenta, MS Amlin, QBE and RSA - but as many as 60 insurers sold similar products. They will now pay out on many, but not all, policies.

Huw Evans, director general of the Association of British Insurers, said: "All valid claims will be settled as soon as possible and in many cases the process of settling claims has begun.

"We recognise this has been a particularly difficult time for many small businesses and naturally regret the Covid-19 restrictions have led to disputes with some customers."

What is this case about?

In the lockdown of last spring, many small businesses made claims through business interruption insurance policies for loss of earnings when they had to close.

But many insurers refused to pay, arguing only the most specialist policies had cover for such unprecedented restrictions.

It was agreed that a selection of policy wordings should be tested in court, setting the parameters for what would be considered a valid claim.

The ruling provides guidance for a wider pool of 700 policies, potentially affecting 370,000 small businesses - although only some of these will end up with payouts.

Giving the court's ruling, Lord Hamblen said the court accepted the arguments from representatives of policyholders and dismissed appeals from insurers against an earlier judgement finding in policyholders' favour.

The complex ruling covered issues such as disease clauses, whether business were denied access to the properties, and the timing of lost earnings.

James Ollerenshaw's hair salon was one of those businesses unable to operate during the first national lockdown.

The business - The Drawing Room in London's Spitalfields - paid an annual premium of £1,200 for business interruption insurance, and disease cover came as part of it.

Mr Ollerenshaw said the Supreme Court's decision would not directly affect his policy, but would decide the principles on claims such as his - and were vital for the business.

"A payout would cover the major costs, which is the rent. We have debt sitting there," he said.

He said he was delighted with the Supreme Court's ruling.

"The insurance industry needs to face up to the fact that it failed customers at their greatest moment of need, destroying companies, livelihoods and jobs," he said.

He formed a Covid Claims Group, joining other small business owners in calling for a quick resolution and payouts.

"Time matters," he said, pointing out that some small businesses have been forced to close down while waiting for the decision.

Sheldon Mills, from the FCA, which brought the case on behalf of policyholders, said: "Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Today's judgment decisively removes many of the roadblocks to claims by policyholders.

"We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible."

The test case was fast-tracked to the highest court in England and Wales - the Supreme Court, which heard four days of legal representations in November. The final ruling provides authoritative guidance for these policies, and potentially of similar ones not part of the case.

The FCA, the insurance sector, and the Financial Ombudsman will all use the judgement to guide their decisions in other cases.

The Financial Ombudsman Service and courts in Scotland and Northern Ireland are expected to use the judgment to rule on other, similar cases.

Insurance policies would have been amended for new and renewing customers since this issue emerged, so losses from the latest lockdown measures in different parts of the UK would be clearly stated as part of the cover - or not - in new business interruption insurance policies.

Source: BBC

£4.6 billion in new lockdown grants to support businesses and protect jobs

Businesses in the retail, hospitality and leisure sectors are to receive a one-off grant worth up to £9,000, the Chancellor has announced.

  • Chancellor announces one-off top up grants for retail, hospitality and leisure businesses worth up to £9,000 per property to help businesses through to the Spring
  • £594 million discretionary fund also made available to support other impacted businesses
  • comes in addition to £1.1 billion further discretionary grant funding for Local Authorities, Local Restriction Support Grants worth up to £3,000 a month and extension of furlough scheme

This follows the Prime Minister’s announcement last night that these business will be closed until at least February half-term in order to help control the virus, and, together with the wide range of existing support, provides them with certainty through the Spring period.

The cash is provided on a per-property basis to support businesses through the latest restrictions, and is expected to benefit over 600,000 business properties, worth £4 billion in total across all nations of the UK.

Chancellor Rishi Sunak said:

The new strain of the virus presents us all with a huge challenge - and whilst the vaccine is being rolled out, we have needed to tighten restrictions further.

Throughout the pandemic we’ve taken swift action to protect lives and livelihoods and today we’re announcing a further cash injection to support businesses and jobs until the Spring.

This will help businesses to get through the months ahead – and crucially it will help sustain jobs, so workers can be ready to return when they are able to reopen.

A further £594 million is also being made available for Local Authorities and the Devolved Administrations to support other businesses not eligible for the grants, that might be affected by the restrictions. Businesses should apply to their Local Authorities.

The new one-off grants come in addition to billions of existing business support, including grants worth up to £3,000 for closed businesses, and up to £2,100 per month for impacted businesses once they reopen.

The government has also provided 100% business rates relief for retail, hospitality and leisure businesses, £1.1 billion existing discretionary funding for Local Authorities, the furlough scheme now extended to April and 100% government backed loans, extended until March.

Further information

The one-off top-ups will be granted to closed businesses as follows:

  • £4,000 for businesses with a rateable value of £15,000 or under
  • £6,000 for businesses with a rateable value between £15,000 and £51,000
  • £9,000 for businesses with a rateable value of over £51,000

Business support is a devolved policy and therefore the responsibility of the devolved administrations, which will receive additional funding as a result of these announcements in the usual manner:

  • The Scottish Government will receive £375 million
  • The Welsh Government will receive £227 million
  • The Northern Ireland Executive will receive £127 million

This will contribute to the funding which has already been guaranteed by the UK Government, to continue to provide the devolved administrations the certainty they need to plan for their COVID-19 response in the months ahead.

Small businesses in the devolved administrations should also be able to benefit from other UK-wide measures in the government’s unprecedented package of support for business, including the various business lending schemes (where the repayment terms were made easier as part of the Winter Economy Plan), and the extension of the Self Employment Income Support Scheme.

Source: GOV.UK

There are signs that the construction industry is slowly recovering

Around 130,000 in construction still on furlough

Peak number was over 700,000 in April

The number of people in construction still furloughed has fallen to less than 150,000, latest figures show.

In the period to 31 October, 130,700 people were still on furlough – down from the 204,400 using the initiative at the end of August.

Figures released by HMRC that in construction the peak of furlough was on 14 April – three weeks after the first lockdown was announced – when 723,600 were using it.

Overall, the number of people furloughed at the end of October was 2.4 million a reduction of 73% from the peak.

Furlough peaked at 8.9 million on 8 May, falling to 5.4 million at the end of July, 3.8 million at 31 August and 2.8 million by the end of September.

The sector with the highest proportion of furloughed staff was the accommodation and food services sector at 27% followed by arts, entertainment and recreation at 24%.

In all, 45% of employers in both the accommodation and food services sector and the arts, entertainment and recreation sector were using the furlough scheme at the end of October.

Lask week chancellor Rishi Sunak confirmed the furlough scheme will be extended by a month to the end of April next year.

Sunak said the government would continue to pay 80% of the wages of furloughed workers until the end of that month.

He also said government would extend its covid-19 business loan schemes until the end of March.

Source: Building

Early Christmas present for struggling businesses as insolvency protection measures extended

Struggling East Midlands businesses are being given an early Christmas present with the news that the Government is offering extra breathing space to deal with the impact of the coronavirus.

A raft of legal changes aimed at protecting businesses from insolvency during Covid-19 were due to expire this month, but these have now been extended to next spring.

The announcement has been welcomed by the Midlands branch of the insolvency trade body R3, as it should provide some flexibility for many struggling firms trying to make the most of an unpredictable pre-Christmas trading period. The organisation sounded a note of caution, however, about how and when the measures would be unwound.

Key updates include the continued suspension of statutory demands and winding up petitions until 31 March. Company AGMs will also be permitted to be held online until 31 March, enabling shareholders to examine company papers and vote on issues remotely.

R3 Midlands Chair Eddie Williams, a partner at Grant Thornton in the region, said: “Local businesses now have an extra three months largely free from the threat of creditor action, which means more time to try and get back on an even keel.

“The big question now for the Government is how to withdraw these support measures in 2021 in a way which doesn’t irreparably damage businesses weathering an unprecedented year of trading difficulties.

“One crucial step would be to ensure that HMRC takes an engaged and supportive approach to its role as a key creditor in most insolvencies. With its new preferential status, HMRC’s support as a creditor will be required to ensure that viable restructuring proposals can be agreed. This could save hundreds of jobs and businesses as our region adjusts to a post-COVID environment next year.

“In the meantime, R3 would urge anyone who is concerned about their company’s financial future to seek advice from a qualified professional as early as possible. Doing so will provide more options and time to make a considered decision about what’s best for their business.”

Source: Business East Midlands Link

UK Liquidators: Support for Tier 3 businesses in Newark and across Nottinghamshire

We face more tough times with the latest Covid restrictions, but there is support out there for struggling businesses.

Nottinghamshire has returned to Tier 3 - also known as the ‘Very High’ alert level.

The area has dealt with significant disruption over the course of this year, and as we approach Christmas, there seems to be no relief from the trading and financial pressures placed on the Nottinghamshire business community.

The government’s measures to combat the economic effects of coronavirus include the furlough scheme, which has been extended to March31. Although the government schemes continue to provide valuable support to local businesses, for some it will simply not be enough, and professional support may be needed.

So what does being in a Tier 3 area actually mean for businesses trying to find a way through this crisis?


Which businesses can open under Tier 3 restrictions?

• Non-essential shops
• Hairdressing, nail, and beauty salons
• Gyms, leisure, and sports venues (apart from dance and fitness classes)
• Wedding ceremonies can continue to take place with up to 15 people attending, but wedding receptions are banned

Which businesses have to remain closed in Tier 3?

• Hotels, B&Bs, guest houses, and campsites

• Hospitality businesses, unless serving takeaway food and drink or offering delivery, drive-through, or click-and-collect services

• All indoor entertainment/tourist venues (including those located within an outdoor entertainment venue)

If Newark and the Nottingham area remain in Tier 3 over the Christmas period, these restrictions will stay in place.

Our team of licensed insolvency practitioners at UK Liquidators can provide reliable, professional advice for businesses in the area on how best to deal with the coronavirus restrictions.

There may be a number of appropriate rescue and recovery measures available to businesses experiencing financial decline due to the pandemic.

Here are just some of the ways the team at our Nottingham office can support your business at this time:

* Tailored insolvency advice: You may be able to enter a formal insolvency procedure, such as company administration or a CVA, protecting your business from creditor legal action and providing a clearer path through the crisis.

* HMRC Time to Pay: HMRC extended their Time to Pay scheme earlier in the year, and this provides up to 12 months’ additional time to pay your tax arrears. We can advise on your company’s eligibility for this scheme, and negotiate with the tax body on your behalf if required.

* Liquidation support and guidance: We can act as liquidators to close down your company in an orderly manner if no other options are viable, and also advise on whether you can claim redundancy pay as a director.

Source: NewarkAdvertiser

Treasury ‘cash grab’ could increase North East business insolvencies, warns R3 regional chair

A new law that comes into force on 1 December which will move HM Revenue & Customs higher up the creditor ladder could push more struggling North East businesses into insolvency.

That’s the warning from Alexandra Withers, regional chair of insolvency and restructuring trade body R3, in advance of the new Crown Preference rules coming into force.

And in the light of the economic crisis that’s been caused by the pandemic, she is calling on the government to make a last-minute reconsideration of its plans.

The rule change will enable HMRC to recover in priority to other unsecured creditors taxes such as PAYE, VAT and National Insurance which have either been paid to insolvent businesses by their customers or which are being held in respect of their employees.

This will mean HMRC will be repaid ahead of unsecured creditors such as suppliers, pension schemes and trade creditors in corporate insolvency procedures.

And Alexandra Withers, along with many other business finance and insolvency experts, believes this change will have a detrimental effect on an insolvent company’s other creditors and will effectively inflict financial distress on them.

She says: “Given that an insolvent company is unlikely to be able to repay all its debts, the lower a creditor is down the order of payment priority, the less of their money – if anything – they are likely to see back.

“The result of the Treasury being able to muscle its way to the front of the queue in this way is that smaller suppliers, who are usually unsecured creditors, will be likely to receive less through an insolvency process than they do now.”

A survey of R3’s members carried out last year showed that nearly four-in-five (78%) of respondents from the insolvency and restructuring profession feared the proposals would make it harder to rescue businesses, while financial services trade body UK Finance estimated the policy could hit lending by at least £1bn per year even before the coronavirus outbreak.

Alexandra Withers, who is an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors in Newcastle, continues: “Our view is that this short-sighted plan for a quick cash grab for the Treasury will cause long-term damage to the UK’s enterprise and business rescue culture, as well as impeding access to finance for North East firms at a time they need it most.

“It could damage over 15 years’ progress on building an enterprise culture, and comes during one of the most difficult periods facing regional businesses as they face the impact of a global pandemic, as well as the potential disruption of a possible no-deal Brexit.

“The Treasury needs the tax income generated by healthy, thriving businesses, a goal which we agree is important, but the new legislation is likely to result in tighter access to finance for businesses, and will probably lead to more business insolvencies, fewer growing businesses to generate tax receipts and higher redundancy pay-outs for the Government to cover.

“In the midst of such a bleak economic outlook, we are calling on the Government to look at the bigger picture and urgently re-consider introducing this policy.”

Source: BDaily

Shock and devastation as Rochdale shopping centre closes permanently

Traders at the Wheatsheaf Shopping Centre, Rochdale, Greater Manchester, have been left devastated after the news broke that the centre will not reopen after lockdown.

The struggling centre had already been suffering after losing big brands Argos, New Look and Wilko's, Rymans, Brighthouse and Select in recent years, but the news has come as a shock to small businesses.

MCR Property Group, who manage the centre indicated that the pandemic has been the final nail in the coffin.

They said: "The ongoing coronavirus pandemic has expedited the migration from traditional shopping habits and the impacts on the retail sector have been significant.

"Since re-opening after lockdown in June 2020, footfall has been tracking at an average of 45% down year-on-year and this lockdown will impact these figures further.

"The financial viability of the centre is not sustainable."

Family run business Fizz Bombs have published a heartbreaking video on social media following the announcement.

The business is run by Lauren, Mark, with their four children.

In the video, Mark said: "The last 12 hours have shocked us beyond belief to be honest.

"It's inhumane and it's disgusting.

"There's nothing we can do.

"We will get through this - we are not going anywhere.

"What we've got works and we know it does.

"We have been asked to leave by December 1."

Mark is seen breaking down on the video.

He added: "To have the rug pulled out from under us...

"People are telling us it will be alright makes a difference.

"This year has been a struggle - not just with the business.

"We will get another shop but its going to take time."

Source: InYourArea

COFF UP High Street coffee chain Caffè Nero calls in restructuring experts to avoid store closures

CAFFE Nero is the latest high street chain to be forced into restructuring its business after profits were hit by the coronavirus pandemic.

The cafe, which operates 660 sites across the UK, has launched a Company Voluntary Arrangement (CVA) to restructure its business and avoid store closures and job losses.

A CVA is a procedure that allows companies to continue trading while allowing a proportion of its debts to be paid back over time.

The process involves agreeing with its creditors, including the landlords of its stores, ways to cut costs without the whole business going under.

It is "the best rescue tool for a company that is viable going forward but is burdened by historic debt", according to Company Rescue.

Caffe Nero is hoping to keep store closures and any related job losses to a minimum.

It's understood the company will look to redeploy any staff if any stores are forced to close.

Caffè Nero employs about 5,000 people and says it serves 135 million customers annually.

Gerry Ford, Caffè Nero's founder, said the second lockdown in England forced the company to act quickly after profits declined.

The company has suffered losses due to the new measures - including curbs on socialising and the Government's advice for people to work from home.

Mr Ford said: "We have expanded our coffee at home range, launched Click and Collect for the first time via our app and we have begun offering a delivery service through Uber Eats.

"However, with our dine-in facilities now closed for a second time, we have little option but to launch this CVA to safeguard the future of our business.”

The founder added the coffee chain had been trading strongly before the Covid-19 pandemic.

But he explained: "Like so many businesses in the hospitality sector, the pandemic has decimated trading.

"And although we had made significant progress in navigating the financial challenges of the first lockdown, the second lockdown has made it imperative that we take further action."

Mr Ford, who founded Caffè Nero in 1997, has appointed leading accountants KPMG to advise on the CVA.

Will Wright, head of regional restructuring at KPMG, said: "Caffe Nero is an iconic brand on the UK’s high streets with a terrifically loyal customer base.

"However, like many others across the sector, the impact of measures introduced in response to the Covid-19 pandemic has been devastating."

The company hopes to get its finances in order, reduce its rent liabilities and exit loss-making stores.

Source: theSun

Q3 2020 England and Wales insolvency statistics, R3 response

  1. Corporate insolvencies fell to 2,672, down 9% on Q2 2020, and down 39% on Q3 2019.
  2. The fall in corporate insolvencies was driven by a decrease in Creditors’ Voluntary Liquidations, though administrations slightly increased (by 2%) and Company Voluntary Arrangements (CVAs) increased by 34% compared to Q2 2020.
  3. Personal insolvencies decreased to 19,783 in Q3 2020, down 40% on Q2 2020, and down 37% on Q3 2019.
  4. The quarterly decrease in personal insolvencies was mainly driven by a sharp drop in Individual Voluntary Arrangements (IVAs), although a registration issue meant there was an abnormally high number of IVAs recorded in Q2 2020. Debt Relief
  5. Orders fell 7%, while bankruptcies rose by 10% in Q3 compared to Q2.
  6. Eleanor Temple, chair of R3 in Yorkshire and a barrister at Kings Chambers in Leeds, responds to today’s publication of the Q3 2020 corporate and personal insolvency statistics for England and Wales:

Corporate Insolvencies

“The corporate insolvency numbers in Q3 are lower than even the figures seen in Q2, after lockdown came into effect, and are another reminder that – whatever the impact of the pandemic on companies – it is yet to be fully seen in the insolvency statistics.

“The figures demonstrate that the support Government has provided to businesses, from providing a range of emergency loans to suspending winding-up orders and stopping commercial evictions, is helping keep many companies afloat during this period of economic turbulence.

“The third quarter of the financial year has been hard for the UK, its economy and its business community. The ONS found that 18% of UK businesses said they are at moderate to severe risk of insolvency, with 38% – two in five – companies in the hospitality sector saying the same thing. There is clearly trouble on the horizon.

“Five months of economic growth have failed to make up the ground lost by the unprecedented 19.5% economic contraction in April, with GDP remaining 9.2% lower than it was prior to the pandemic. We’ve also seen a number of big brands announce restructurings or enter insolvency processes over the last quarter, as the pandemic affects their customer base and their income.

“Retailers, hospitality, manufacturing and the service sectors have all been hit – and while some of these have shown signs of recovering, others are still not where they were before COVID. With the winter drawing in and a second national lockdown looking increasingly likely, even as some areas are put into local lockdowns, the chances of this recovery continuing are uncertain at best.

“Our members are telling us that they have returned to receiving requests for insolvency and restructuring advice and support, after a flurry of requests for advice about the Government’s support measures at the start of the pandemic.

“Looking ahead, the festive season is often the linchpin of the year for many companies, especially retail and hospitality businesses who build their business models around strong takings as people celebrate Christmas and other holidays. But this year, there is concern this model will not work as it has in the past, especially with limits on social gatherings, and curbs on travel to see family and friends. It remains to be seen how successful the Chancellor’s Winter Economic Plan will be at reducing economic pain – or if it will only delay it.

“Despite the Government’s efforts, there are likely to be a number of directors of businesses who are in a worrying position because of COVID – many of whom would have little cause for concern if the pandemic hadn’t happened, as their businesses would most likely have remained profitable.

“We would urge anyone who is in this position to seek advice from a qualified, reputable source as soon as they see signs their business is starting to struggle. The sooner you seek advice, the more options you have to potentially resolve your situation – and the more time you have to come to a considered decision about your future.

“Many R3 members offer a free consultation to people who are looking for help with their business finances and want to explore their options or understand how they might be able to resolve their situation.”

Personal Insolvencies

“The fall in personal insolvencies over Q3 was driven by a decrease in IVAs and Debt Relief Orders compared to Q2, although bankruptcies increased compared to the previous quarter’s figures. Compared with the same quarter in 2019, all types of personal insolvency procedure saw a steep drop in numbers.

“This shows the Government’s support measures have continued to provide a safety net for many individuals. The furlough scheme has ensured a number of people remained in employment even if they were not working during that time, which has contributed to the reduction in insolvency levels. However, the recent extension of the furlough scheme offers a lower percentage of wages than its first iteration, which, although a lifeline for many, may not be enough for a lot of those affected to pay their bills.

“Despite this, we know people are worried about their future financial health – and that of the economy. Unemployment is at the highest level it’s been for three years – and expected to rise again in the short-term – and we have seen the biggest level of quarterly redundancies on record.

“Although consumer confidence increased quarter on quarter, it’s still much lower than it was this time last year – and before the pandemic. Consumer spending is much lower than at the same time last year, with outstanding credit card balances well below where they were 12 months ago, while mortgage approvals are at their highest level since 2007, following the stamp duty holiday.

“A lot of people in higher-income households have been stockpiling cash, with reduced opportunities to spend on travel or going out, while at the other end of the scale, people in low-income households are in many cases finding it very hard to get by, with reduced incomes leading to negative monthly budgets.

“This slowdown in non-mortgage spending is understandable as many people are just one change in circumstances away from being unable to keep on top of their debts – and it would be fair to say many are aware that the risk of a change in circumstances is increased in the current climate.

“It can’t be said enough – turning to a qualified and professional source of advice if your finances take a turn for the worse is always a good idea. The earlier you seek advice, the more options you have to try and resolve the issues you face.”
This was posted in Bdaily's Members' News section by Melanie Rice.


UK nightclub owner Deltic Group up for sale as bankruptcy looms

Lack of government help since Covid hit has ‘slowly choked us to death’, says boss Peter Marks

The UK’s largest nightclub operator, Deltic Group, is seeking a buyer as it fights to stave off bankruptcy after the seven-month closure of its venues during the pandemic drained the business of cash.

Its chief executive, Peter Marks, lashed out at the government for failing to offer more support to the nightclub industry, as he confirmed the sale plan.

UK nightclub owner Deltic Group up for sale as bankruptcy looms

Nightclubs are among the very few businesses unable to reopen at all since Covid-19 hit the UK; Marks said the government’s failure to offer more support had “slowly choked us to death”.

In an effort to ensure its survival, Deltic has already cut 1,000 staff – about half its headcount – and has repurposed parts of its clubs as bars, allowing it to reopen 10% of total floor space.

But Marks said this was bringing in £80,000 a month, compared with the £1m that the company is burning through, leaving it facing running out of cash by December.

Marks said he was looking at every option to secure the survival of the business, which runs 53 clubs, including Pryzm in Birmingham and Eden in Newcastle and Manchester.

The options could include a company voluntary arrangement (CVA) – a form of insolvency that typically involves site closures and an agreement from creditors to cut rents or fees.

But Marks, who told the Guardian in August that the company could not survive without more state support, said he was also exploring a sale.

“We have to look at every option going and part of that is to see what other capital is out there to get the business through this,” he told the Financial Times, which first reported the story.

Michael Kill, chief executive of trade body the Night Time Industries Association, said: “As the weeks and days go on we’re going to see more and more of this happening.

“People within the business will be concerned about their future and it epitomises the concern in our sector, whose businesses have been restricted for a long time without considered and proportionate support.

“For many companies, we’ve missed the boat. Now we’re starting to lose businesses and the government needs to act at pace to stem this loss.

“Our night-time economy will slip away if we’re not careful.”

Source: The Guardian