As we head towards the end of 2022, companies across the country continue to struggle with the rising cost of doing business. A conflation of issues has combined to increase the pressure on firms still recovering from the lingering effects of the pandemic - employment concerns and ‘quiet quitting’, rising inflation, climbing interest rates, and spiralling energy costs among them. Continuing supply chain disruption only serves to add to these difficulties.

The Chancellor’s mini-budget will potentially see the interest rate rise further still as a means of controlling inflation. In August, the Director of Policy and Public Affairs at the British Chambers of Commerce, Alex Veitch, warned that “the higher than expected inflation increase, alongside eye-watering energy prices, confirms the severity of the cost of doing business.” The Bank of England, meanwhile, has warned that “the share of companies likely to experience difficulty paying their debt will increase,” and the Guardian reports that consumers themselves are expected to spend 22% less in the run-up to the crucial Christmas period, a knock on effect of the similarly-increased cost of living.

Risk management is key when businesses are faced with sudden cash flow problems or unexpected situations, including recognising the warning signs of financial distress or headwinds and seeking expert support to help navigate a safe course through a volatile market.  This is especially true for businesses who are concerned about defaulting on secured borrowing, given that a secured lender will likely have significant powers to take action to recover any debt owed to them. Taking advice promptly can be the difference between a positive or negative outcome.

Andrew Walker, national head of Restructuring & Insolvency.

“This is a difficult period for businesses, and being alive to the warning signs of financial problems is critical. Taking expert advice at the earliest opportunity will help to ensure the best possible outcome. Our solicitors can help businesses to identify and manage risk, and can advise on cash-flow by looking at finances and identifying areas to improve – especially important if a business is struggling to meet demands for payment.

"We can advise directors on their statutory and common law duties to help avoid serious risk to them. The ramifications of failing the ‘cash-flow insolvency test’, and failing to pay invoices when they fall due, for example, can have serious personal legal and adverse financial ramifications for directors.

"We have seen that where businesses and directors are quick to recognise potential headwinds, and engage with experts promptly, the chances of a positive result are greatly improved. Our team has advised businesses and directors during this difficult period, providing guidance on duties and courses of action, and helping to safeguard jobs and livelihoods.”