By Rob Adamson, Restructuring Partner, Armstrong Watson

THE Bank of England recently announced that it expects the UK economy to shrink by 9.5% this year, which would make it the biggest annual decline in 100 years and will inevitably lead to one of the sharpest recessions in history.

Unemployment is also anticipated to increase to 7.5% once the Government’s Coronavirus Job Retention Scheme (“CJRS”) comes to an end.

However, the Bank also believes that the UK economy will grow by 9% in 2021 as business bounces back, albeit at a slower rate than previously forecasted (15% in May). This slower recovery shows that the Bank of England is anticipating that the pandemic is having a greater effect on business than originally envisaged.

The idea behind a ‘U-shaped’ recovery is that it has a relatively flat line until the economy is able to pick up again, which will hopefully be by the end of 2021. This comes from the lack of consumer confidence, uncertainty around jobs, the withdrawal of Government support and also an increase in debt for businesses.

Business owners will need to have patience and refrain from panicking if their growth is not as previously envisaged – many businesses will not make a profit and business owners need to be prepared for that – making losses does not mean that your business is insolvent but it does mean that you need to manage your position.

If your business has been impacted by the lockdown and continues to do so, forecasting cashflow and reviewing overheads is essential, particularly if your turnover has been adversely impacted. With less cash available you will need to look at the costs of your business and understand where you can make savings. If you think you are likely to struggle with paying deferred debts when they are due, it’s important you will deal with this head on.

There will be difficult times ahead for everyone but most definitely for many business owners. Lockdown may be over on a national basis (for the time being at least) but the recovery will take time and many businesses are unlikely to look the same as they did pre-COVID, and there are positives to take from that too – this should be seen as an opportunity to redefine and build resilience, even if there is some pain along the way.

Please get in touch with us if you have concerns about your business; whilst the road to recovery will be a rocky one, it doesn’t have to be a path you take alone. Contact Rob Adamson on 07970 731804 or email