Chancellor Urged to Consider Debt Relief Scheme in Support of Struggling Firms

Chancellor Rishi Sunak is being urged to consider the option of introducing a ‘debt relief scheme’ to support the thousands of companies across the UK who’ve added notably to their debt levels in recent months.

Indebtedness among businesses has increased substantially in 2020 and over the course of the coronavirus pandemic, with a high number of firms expected to find it difficult or impossible to keep pace with demands for debt repayments in the coming years.

A wave of insolvencies could be likely unless the government is able to find ways of providing relief or support to businesses that find themselves in debt and in serious financial difficulty.

At least that’s the case being made by the think tank Onward, which is calling for the chancellor to seriously consider allowing companies to pay down their government-issued debts over an extended period of time and through a surcharge on taxable profits and shareholder salaries.

The organisation’s own analysis of Office for National Statistics data concludes that around 4.3 per cent of British companies could soon be pushed into insolvency unless they can find ways to manage their debts more sustainably, including what they now owe to the UK government.

The think tank also estimates that around 1.8 million people are currently employed by businesses that may well not be able to settle their outstanding debts if they were to be dissolved.

Making its case for the creation of so-called ‘New Start’ debt relief schemes, Onward has emphasised the idea that having high numbers of companies becoming insolvent over the next few years would be bad for employment levels across the country and would also hamper any post-Covid economic recovery.

“The government’s loans schemes have been highly effective at helping firms through the worst of the crisis, but they represent a double-edged sword in that they have weighed down firms with debt just as we need them to invest to spur the recovery,” said Angus Groom, one of the authors of a report published recently by Onward.

“The chancellor has so far appeared reluctant to consider restructuring the newly issued Covid debt. The New Start scheme gives the option to intelligently delay repayments only for those firms who need it.”

If your business is struggling with mounting debts due to the impact of Coronavirus, contact us today for a free director consultation.