The UK currently hosts around 1,000 festivals every year, from live music, cooking to arts, and contributes over £1.76 billion to the UK economy through music festivals. The live music industry employs 85,000 individuals, such as promoters, organisers and ticketing agents, and attracts spending from domestic and overseas music tourists. Music festivals can range in popularity and capacity, from Glastonbury, Creamfields and Parklife, to Kendal Calling, Camp Bestival and Truck festival. Micro and budget festivals also contribute to local economies as they drive income to small businesses through music tourism.
The coronavirus pandemic triggered national lockdown restrictions which led to the cancellation of mass gatherings in 2019, and almost half of UK live music festivals were forced to cancel again in 2021 after the lifting of lockdown measures was delayed. With limited support available to bolster the live events sector, festival organisers are under pressure to sustain company cash flow until gigs can operate as usual and at full capacity.
According to the Association of Independent Festivals, organisers spend on average, 25% of their overall costs when festival planning, ranging from £5,000 to £4 million for live music events with a capacity between 5,000 and 70,000 respectively. Committing to a sizeable upfront cost for live music events dubbed by Covid-19 uncertainty removes the safety net for event organisers, exposing them to huge losses in the event of another lockdown or a further delay to the lifting of lockdown restrictions.
The financial risk is further heightened as last-minute government advice impacts cancellation insurance when hosting live events, posing a threat to the core UK Summer festival season.
The live music industry remains buoyant under the weight of last-minute cancellations, propped by financial support from the Culture Recovery Fund, if eligible, however, company closure may be on the cards for festival organisers forced to cancel or postpone for a second year. As some festival organisers are out of cash, making it no longer viable to continue, they will need to explore company recovery procedures to secure income to begin future event planning.
As the hospitality and entertainment industry is given the green light to host at full capacity, your festival company may require urgent rescue support to facilitate 2021 plans. A licensed insolvency practitioner will aim to rescue your business, however, putting a festival business into liquidation may be the final resort for insolvent companies.
As a festival organiser grappling with cash flow problems, the prospect of continuing without a reliable income stream could lead to the downfall of your business. The operating nature of festivals means that generating income is only possible once a year, therefore multiple cancellations could push the business into serious financial difficulty. If your live music or entertainment business is in financial distress, speak to a licensed insolvency procedure to explore how to rescue your festival business.
If your business has no real prospect of recovery as it is out of cash and cannot settle creditor debts, company liquidation may be a suitable route. Company liquidation is a formal insolvency procedure used to settle creditor affairs and close the business. This step must be taken with care as the decision to close your business will impact shareholders, suppliers, creditors, festivalgoers, and the business community situated around your festival sites, such as hotels and restaurants.
There are different types of company liquidation procedures, such as a Creditors’ Voluntary Liquidation (CVL) which may be a suitable route for your festival and events business. This route can only be pursued under the guidance of a licensed insolvency practitioner.
A CVL is a voluntary company liquidation procedure that aims to maximise funds for creditors. Company assets will be independently valued, from fixed assets, such as trailers, staging and production equipment to intangible assets, such as investments and intellectual property. Once company assets are sold and the proceeds distributed to the hierarchy of creditors, as set out by the Insolvency Act 1986, the business will be closed and removed from the Companies House Register.
The liquidation procedure will need to be handled with care by an experienced licensed insolvency practitioner as high-profile cases could rapidly attract negative publicity because of disgruntled creditors. As the director of your festival company, it is your legal responsibility to act in the best interests of creditors and access insolvency support when witnessing the first signs of financial struggle.
When news of the pandemic wiped out all plans to host mass gatherings, from music festivals, gin festivals, to foodie festivals, many businesses reacted by hosting events online. As festivals offer more than on-screen performances, from the atmospheric buzz, to the camping lifestyle or physical food tasting experience, the online route presented an unsuitable alternative for many events.
The entertainment industry was blighted by lockdown restrictions, making future planning impossible in the face of the pandemic. Covid-19 lockdown restrictions disrupted life-long traditions for festivalgoers and threatened job stability for employees, contractors, and volunteers alike.
As 40% of overall festival costs typically fall due one month before the event, festival organisers footed these costs at the risk of another lockdown or extension to event restrictions. Hosting a mid-sized festival typically costs around £2 million, resulting in festival organisers to taking a chance on lost costs if the economic situation worsened.
In response to the coronavirus pandemic, the government unveiled a host of financial support measures to subsidise employee wages and help festival companies overcome economic challenges posed by the pandemic. The Coronavirus Job Retention Scheme (CJRS), also known as the furlough scheme, contributed towards a percentage of employee wages to lighten the financial burden on festival businesses. As company cash flow was limited and cash reserves depleted, government funding helped brace festival companies for Covid-19 trading uncertainty.
Depending on the size of your festival company, a government-backed loan was offered through the Bounce Back Loan Scheme (BBLS) or Coronavirus Business Interruption Loan Scheme (CBILS). The guarantee was provided by the government, making these loans easily accessible and available interest-free for a limited period. Presented as a helping hand for festival organisers forced to cancel their annual event due to Covid-19, businesses turned to debt loading to bridge the income gap.
One of the dangers of debt loading meant that businesses unable to keep up with existing payments were weighed down by further debts. Jeapordising their future financial position and ability to recover from the adverse challenges inflicted by the pandemic, festival organisers were presented with limited choices in their fight for survival.
The industry urged the government to underwrite Covid-19 cancellation policies to help festival organisers avoid bankruptcy in the event of last-minute cancellations. Failure to provide this assurance resulted in a wave of festivals to cancel due to lack of insurance. Without this safety net, festival companies were exposed to substantial financial losses and at serious risk of becoming insolvent.
We offer a free consultation to all festival companies and event organisers looking to explore business recovery and company liquidation options. If you want to rescue, close or sell your festival business, our licensed insolvency practitioners will help secure a future for your company and achieve the best return for creditors.
Founded over a decade ago, Robert’s four-day music festival took place every year in the South West of England, quickly growing from a capacity of 10,000 to 50,000. The medium-sized festival also launched an off-shoot festival catered to families.
The business was pressured by a creditor to seek insolvency support after running into financial difficulties. The Real Business Rescue team were tasked with settling creditor affairs in the first instance.
The festival company owed thousands of pounds to artists that headlined at the last event and eventually collapsed into administration. The company also owed refunds to customers for last-minute cancellations, adding to their list of creditors. A mainstream ticketing agency and a local security supplier were also amongst the list of creditors.
The team behind Real Business Rescue launched a bid to attract offers to facilitate the sale of the business. The festival company was sold to the highest bidder for over £1 billion, including the brand and company assets.
If you wish to depart from your festival business, taking the business sale route can help source a buyer with a suitable skillset and hands-on industry knowledge to continue the business forward. Selling your festival company can help release cash from your investment and pave an exit route without interruption to existing bookings and company operations.
This route is a possible alternative to company liquidation as you can attract a host of buyers interested in reviving your financially distressed business. To sell a festival company and establish a suitable price point, you will need to arrange a business valuation. We offer a free business valuation to company directors looking to sell their festival and events businesses and require no upfront payment.
A company valuation will assess company assets, liabilities, and the financial performance of the business. This information will help determine the market worth of your company and attract prospective buyers with the relevant funds to invest in the acquisition opportunity. By calculating how much your festival company and any associated brands are worth, you can begin marketing your business for sale and secure an interested buyer.
At Real Business Rescue, we work closely with nationally renowned business brokers and business sale agents with demonstrable experience in selling event companies. As a leading provider of business transfer services, they will guide you throughout each stage of the process, from company valuation, due diligence to sale completion.
Our licensed insolvency practitioners will be able to assess if your festival company can be rescued through a suitable restructuring strategy, such as a Company Voluntary Arrangement (CVA) or Company Administration.
If your festival company requires a rapid cash injection to enable growth, company finance may be available through competitive lenders working closely with the Real Business Rescue team. We can source a deal that reflects value for money and boosts company cash flow, putting you on track to host a much-awaited comeback festival as we exit from the pandemic.
If you are in arrears, a Company Voluntary Arrangement or Fast Track CVA can help enter negotiations with creditors to propose an affordable payment plan. A Fast Track CVA can offer an efficient business rescue tool during Covid-19, by helping your festival business regain health under time-sensitive conditions.
By facilitating recovery and returning your business to a strong financial position, you can invest in your festival line-up, launch marketing campaigns, and reassure suppliers of your business health. Taking this step can preserve the reputation of your festival and give confidence to both performers and attendees to invest in your festival.
If your festival business is cash poor, however, the company is rich in assets, entering company administration can help realise asset value to generate funds for creditor repayments. If you are under serious pressure from creditors to make repayments, you may stimulate company recovery by taking this route. This can prevent your financial position from worsening and settle affairs with creditors.
It is a common misconception that company directors are not entitled to redundancy pay. If your festival business enters company liquidation, such as a CVL or company administration, you may be able to claim for director redundancy and other statutory payments. Company directors are classed as employees of their limited company and may therefore have a legitimate claim for director redundancy.
To qualify for director redundancy for which the average claim is £9,000, you must meet strict requirements. You must have worked for your music festival company for at least 16 hours per week for a minimum of two years. A contract of employment should exist, and you must be paid for your work through PAYE.
Your claim for directory redundancy will depend on the length of your service, age and salary. You may also be owed statutory holiday pay, notice pay and unpaid wages. Director redundancy pay and other statutory payments are paid from the National Insurance Fund by the Redundancy Payments Service (RPS).
A licensed insolvency practitioner will introduce you to a regulated claims management firm during the company liquidation process to help assess and prepare your claim for director redundancy.
28th July 2021
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22nd July 2021
The Confederation of British Industry (CBI) has called for an “immediate rethink on self-isolation rules” to help businesses manage their workforces as the economy reopens and recovers.Read More