Updated: Sep 24, 2020
An article I kept from a few months back, Is this collapse due now !!!!
We have around two months until contractors run out of money. That’s the average figure I’ve had quoted at me by a range of business owners and industry experts over the past two weeks.
With almost two-thirds of work stopped in the UK, contractors across the country are living off reserves and final payments for work done in January and February. In around six to eight weeks a lot of good firms – not firms that were in distress before the pandemic paralysed the economy – will find their coffers are bare. Some will inevitably be able to last longer, but they will feel the pain too. For others, even six weeks will be far too long.
The government’s £330bn finance support measures unveiled in the middle of March were designed to mitigate this cash flow crisis. However, more than three weeks on from that, companies up and down the supply chain – from SMEs turning over a couple of million to multi-billion blue-chip tier ones – are telling us the cash is not reaching them. A mix of administrative overload and, in some quarters, a resistance to lend to contractors is strangling supply.
Remarkably, there is still a lot of goodwill for the government’s efforts on the financial support front. Even those being frustrated in their attempts to access finance recognise this is an extreme situation, unprecedented in modern times. There is hope that the system will evolve soon and that the cash will start to flow.
However, hope will not pay those absolute bare minimum operating costs – premises and plant leases, insurance, bills, etc. - that even firms with zero live jobs must bear.
The government may have to take further extraordinary steps and go beyond simply guaranteeing the loans, it might need to actually start administering loan applications too. If a way to make the cash flow cannot be found then huge numbers of firms, including good, solid contracting businesses, will become insolvent in a matter of weeks.
The clock is ticking.