The coronavirus pandemic has raised a unique set of challenges and industry disruption as supermarkets and food suppliers operate at maximum capacity, leading to increased demand for haulage, transport and logistics businesses. Demand, however, has been uneven across micro-industries, however, as loyal events, wedding and catering businesses have transitioned into trading at minimum capacity or, becoming completely inactive due to the lockdown.
The coronavirus pandemic has established the position of delivery drivers as essential workers, instrumental in the delivery of urgent goods to consumers and businesses alike. The haulage industry has experienced substantial pressure from the health and medical sector in the delivery of personal protective equipment (PPE) and emergency ventilators in the fight against COVID-19. Due to consumer stockpiling and the need for greater medical supplies, the pandemic has led to longer hours, increased workloads and higher health risks for haulage workers.
It is forecasted that the haulage sector will take up to five years to recover to pre-COVID-19 trading levels due to the impact on the supply chain. As a result of social distancing measures and increased local lockdowns, the hospitality sector has been hugely affected, creating a domino effect as haulage companies dependent on such contracts are forced to source alternative custom.
The health of delivery drivers is paramount during the coronavirus pandemic as the high contact profession carries a greater transmission risk. The trade union, Unite, has been campaigning for the welfare of drivers at delivery and collection sites. Due to COVID-19, some haulage staff are being denied access to facilities such as toilets and washrooms in commercial premises. It is the legal responsibility of such sites to provide welfare facilities to drivers, a rule which is being breached, making this a cause for concern for the Health and Safety Executive (HSE) and Public Health England.
Failure to provide such services increases the risk of the virus spreading and can have a drastic impact on an already reduced workforce. If existing skilled drivers are forced to self-isolate, recruiting temporary staff to ensure business continuity is likely to increase overheads. As demand for LGV drivers, HGV drivers, lorry drivers and delivery van drivers soars, accessing highly-experienced talent with the desired logistical qualifications, such as a Driver Certificate of Professional Competence (CPC), a clean record and open availability may be challenging to come by at short notice.
As hauliers take advantage of the Coronavirus Job Retention Scheme (CJRS) to furlough staff, releasing them of their work duties while keeping them on the payroll, lack of flexibility around the CJRS threatens service fulfilment. As demand for delivery drivers fluctuates based on consumer needs and industry restrictions, hauliers are urging for more flexibility to call back furloughed staff intermittently. As haulage owners are forced to firefight demand, the flexible furlough announcement was a measure long overdue.
The UK logistics industry contributes over £75bn to the UK economy, employs 2 million people, and is experiencing unprecedented growth; however, company liabilities continue to rise, such as vehicle lease and hire purchase bills, in addition to repair, maintenance and fuel costs.
Another key issue facing haulage companies in 2021 is staff shortages. The supply of HGV drivers cannot keep up with demand, which has led to an increase in staffing costs. The sector is seeing a sharp rise in staff salaries as employees become emboldened by the demand for their services, and subsequently seek pay rises or a move to a different firm that is offering more. We have already heard from small-to-medium sized haulage companies who are struggling to afford staff costs - causing stress and disruption to their business.
If your business is now in an insolvent position, you may be considering closing your haulage business and exploring company liquidation options.
A Creditors’ Voluntary Liquidation (CVL) is a formal insolvency procedure which involves the haulage company director voluntarily bringing the business to a close. Administered by a licensed insolvency practitioner, this route is appropriate for haulage businesses with no prospects of recovery. A CVL consists of raising funds to repay creditor debts by realising assets, with the remaining debt typically written off, resulting in the closure of the business.
If your haulage company is cash poor, but asset rich, company administration may be suitable for your insolvent or contingently insolvent business. Due to the high-value nature of the typical assets of a haulage business such as trucks and lorries, putting your company into administration may be an option if you are looking to save your company. A licensed insolvency practitioner can help determine the appropriate solution for your business to facilitate an orderly exit or a restructuring exercise to bolster business operations and access alternative finance.
Haulage businesses are facing deterioration as a result of the economic pressures surrounding the coronavirus pandemic, including sudden contract terminations from struggling businesses, workforce maintenance difficulties and growing costs. In response to the pandemic, the government have announced a raft of measures to support the haulage sector.
The CJRS - or furlough scheme - lends short term support to company directors to retain staff during times of slow trade as hauliers are being forced to reduce workforces until the sector reaches pre-COVID-19 business trading levels. Services delivered by haulage companies dedicated to the entertainment, hospitality and leisure sectors are likely to have been made redundant as tier 3 restrictions, local measures and border controls enforce shutdowns.
The Bounce Back Loan scheme offers emergency financial support for small to medium-sized businesses in the face of the virus outbreak. Haulage businesses can borrow up to 25% of their turnover, capped at £50,000. The loan is fully backed by the government, consists of no fees and interest will only be payable after 12 months. Your haulage company is likely to qualify for the loan if it is UK-based, established before 1 March 2020 and has been adversely impacted by the virus.
The Coronavirus Business Interruption Loan Scheme offers a government-backed loan for small to medium-sized businesses up to £5 million. You will not be required to pay interest and fees for 12 months and the government will guarantee 80% of the finance. To qualify, your haulage business must be UK-based and have a turnover of up to £45 million. As a loan condition, you must be able to illustrate that your business was otherwise viable pre-Covid-19 and has been impacted negatively as a result.
If your business requires additional money to ease cash flow, maintain mounting liabilities and equip the business against the coronavirus pandemic, commercial finance can inject the business with a burst of cash. Alternatively, if you believe your business holds value and can thrive under strong leadership and stable cash backing, you may wish to consider selling your haulage business. Serious buyers with a genuine desire to expand their market share in the transport industry continue to search for their next venture.
We offer a free consultation to haulage business owners across the country to access urgent business restructuring and recovery advice. As Covid-19 measures downgrade fleet numbers, resulting in a skeleton workforce, it is crucial to adapt your services to retain a steady income. The earlier you contact Real Business Rescue the more options will be available to you.
Tom and his wife held 50% shares each in their transport business which they founded in the 1990's. Their long-running haulage company provided a comprehensive range of courier solutions, such as same-day and next-day parcel delivery services to clients across the country, from fast fashion, homeware to independent, electrical appliance brands. The business operated successfully for over 30 years and the client base was spread across a range of sectors, rather than being overly reliant on a handful of high-value clients.
In the run-up to the coronavirus pandemic, the business began to fall short of cash, having an invoice finance facility tied to a personal guarantee (PG) agreement, £21k for a business loan which also consisted of PGs, £6.5k to a fuel card company and £7k to mechanics. In addition to this, the business leased one articulated lorry and owned three curtain side lorries. The business operated from freehold premises and employed four full-time drivers.
Tom took advantage of the Coronavirus Job Retention Scheme and furloughed his workforce; a short-term solution to give the business breathing space until he determined the next step. Having then contacted Real Business Rescue, Tom and his wife discussed their desire to rescue the business as it still had asset value and live tenders. Tom explored refinance opportunities to provide realistic guarantees to creditors and breathing space to complete existing and upcoming high-value contracts.
If you are considering selling your road haulage, freight, transport or logistics business, either distressed or in good health, listing your business for sale is a possible alternative to company liquidation. If your business has a strong performance history, healthy profits and stable borrowing behaviour, it is likely to attract competitive industry buyers. The coronavirus pandemic has pushed viable and thriving businesses to their knees. If your business is deteriorating and experiencing financial difficulty as a result of COVID-19 pressures, an interested investor may have the necessary resources to take over the reins of your haulage company.
If your haulage company is experiencing financial difficulty due to rising costs and poor cash flow, there may still be a possibility that your business can be rescued. Business turnaround options do not apply to every struggling business, however, if you are facing the brunt of COVID-19 pressures due to the loss of key customers, you may require a cash injection to bridge the income gap. We have an in-house team of commercial finance experts with access to a competitive range of lending products, such as invoice finance, asset finance, commercial property loans and industry-specific finance.
An alternative restructuring strategy for haulage companies consists of a Company Voluntary Arrangement (CVA) or Fast-Track CVA. A Company Voluntary arrangement is a formal insolvency procedure which allows you to restructure your liabilities with creditors. By negotiating your payments into affordable instalments, this can provide much-needed flexibility and breathing space for your haulage company until you resume full operations and recover from the financial impact of COVID-19. Although a CVA is an appealing option, not every haulage company will qualify for one and can be only entered into on the recommendation of a licensed insolvency practitioner.
A Fast-Track CVA is a similar concept which accelerates the procedure in as little as six weeks to supercharge the recovery of your business. If your haulage company is unable to fulfil existing liabilities, however, it has a genuine chance of survival following restructuring, a CVA can provide the flexibility needed during these unprecedented times. A Fast-Track CVA can put your business back on track and provide the necessary relief during this period of economic instability.
If your business is on the receiving end of extreme creditor pressure and winding up petition threats, putting your haulage business into company administration can protect the business from legal action which could result in the compulsory winding up of your business. A licensed insolvency practitioner, acting as the company administrator, will take over the responsibility of the business's affairs. The company's administrator will protect the position of creditors from worsening and realise company assets to repay creditors.
If your business has exhausted the possibility of a rescue, making an orderly exit through a Creditors’ Voluntary Liquidation can allow for outstanding affairs with creditors to be settled, before your company is wound down and removed from the register held at Companies House. If your business cannot be successfully saved, this route may be the best solution for all parties involved. This procedure consists of making a formal decision to wind up your haulage business and following notice to shareholders and creditors, the liquidation will commence.
Our licensed insolvency practitioners will conduct a review to determine if it is possible to rescue your haulage company through a restructuring strategy or if company liquidation is the best step forward. We can also provide access to emergency funding or private equity finance through several, trusted market leaders.
If your Haulage company enters company liquidation, you may be entitled to director redundancy if your business has been trading over two years. In addition to redundancy pay for haulage company directors for which the average claim is £9,000, you may be able to claim statutory payments, such as notice pay, holiday pay and unpaid wages. It is common for exiting company directors to miss out on their claim for redundancy pay simply because they are unaware of their right to claim.
A claim for redundancy pay for directors can be made before your haulage company is liquidated or within 12 months of your company entering liquidation. Many company directors undergoing the liquidation process are unaware of their entitlement to redundancy pay and therefore lose out on thousands of pounds. To successfully claim director redundancy, you must be working 16 hours on a weekly basis for your haulage company, have an employment contract spanning a minimum of two years and receive payments through PAYE.
As part of the liquidation process, your licensed insolvency practitioner will refer you to a regulated and independent, claims management firm specialising in director redundancy. They will assess your entitlement and calculate your director redundancy payment.
13th October 2021
The Bank of England has said it anticipates that rates of corporate insolvency will increase in the coming weeks following the removal of restrictions on winding up petitions.Read More