Tax and consulting firm RSM is calling on the government to extend new insolvency rules to help travel firms survive after September.
The firm says a three-month extension to the Corporate Insolvency and Governance Act beyond September 30 would allow travel, tourism and other consumer-facing businesses more time to bolster their debt positions ahead of an anticipated rise in trading in the run-up to Christmas.
It has written to chancellor Rishi Sunak (pictured) to highlight the likely fate of many businesses if the little-talked-about measure is not extended.
The Corporate Insolvency and Governance Act came into force in June after being fast-tracked through parliament. It means statutory demands and winding-up orders served on travel companies during the Covid-19 crisis are void.
RSM said: “September 30 will see better-known measures end, such as the rent moratorium, Coronavirus Business Interruption Loan Scheme and the last embers of the furlough scheme.
“But it is the Corporate Insolvency and Governance Act, ending on the same day, that brings the spectre of directors becoming personally liable for debts if they are found to be trading while insolvent from October 1.”
Ian Bell, partner and head of travel and tourism at RSM, commented: “Make no mistake, sticking to the current timeline will be the death knell for vast swathes of consumer-facing businesses.
“But if these companies can be given a chance to take advantage of an economic upturn, and importantly the Christmas period, the government needs to extend the Corporate Insolvency and Governance Act easement.
“By doing so, it will back these businesses and give them a chance to extend their recovery period. Without it, most simply will not survive.
“A three-month extension may also allow them the time to find more-permanent restructuring of their debt positions once their new operating models are better-known.
“Failure to do so will expose all the government’s generosity of the summer months and render it worthless.
“No industry has been more affected by the coronavirus pandemic than the consumer-facing sectors.
“The chancellor’s measures have given the consumer industries much-needed breathing space and the opportunity to be able to emerge in a Covid-secure way as lockdown relaxes.
“The UK’s travel, high street retailers and casual dining businesses are the frontline of our economy, with industry and financial markets reliant on consumer spending.
“A three-month extension could – just could – be the lifeblood these businesses need to allow them to survive and contribute to the UK’s wider economic recovery.”
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