2020 in words and numbers
"Unprecedented" is the unofficial word of 2020, a year so full of unparalleled events that Oxford Dictionaries chose, for the first time, to mark it with several "words of an unprecedented year"1 rather than just one. In our final Thought of the Month for 2020, as well as in words, we recount the main events of the restructuring year in numbers.
Looking forward, we predict that the word for 2021 will be "restructuring". When the UK government Covid-19 support measures and insolvency restrictions come to an end, whether in Spring 2021 or perhaps later, the UK economy will be left with a painfully large number of companies with problems to solve. Some of them will no longer be able to survive and will need to be liquidated. Some of them will have viable businesses, but will be overburdened by accumulated Covid-19 and historical debt, and will need to be restructured. Insolvencies will undoubtedly increase, but restructuring solutions – both novel and tested – will be put to good use. Ashurst's restructuring and special situations team stands ready for the challenge of 2021. We look forward to helping our clients find the solutions they need.
| -18.8% |
The fall in GDP in Q2 of 20202, which was followed by a 16% rebound in Q3 of 2020. GDP for 2020 is forecast to be 11.1% lower than in 20193. |
| -4% to -6% | The negative impact that the Office of Budget Responsibility, an executive non-departmental public body sponsored by HM Treasury which gives independent and authoritative analysis of the UK's public finances, estimates that Brexit will have on the UK's GDP: -4% of GDP per year with a Brexit deal and almost -6% of GDP per year with no deal4. |
| 2 | The number of restructuring plans that were sanctioned by the court following the new CIGA procedure becoming available at the end of June (see below). Ashurst acted on the first of those, the Virgin Atlantic Airways Ltd restructuring plan, see our client briefing here. PizzaExpress Financing 2 Limited was the second company to have a restructuring plan sanctioned in 2020. A third restructuring plan has been launched by Gategroup, with the convening hearing expected to take place around 15 January 2021. |
| 13 | The number of months the government Covid-19 measures will have been in place when the final extension is supposed to end on 31 March 2021. |
| 18 | The number of years since the last big reform of our restructuring and insolvency regime before this year's hastily legislated Corporate Insolvency and Governance Act 2020 ("CIGA"). It took roughly 7 weeks to draft the Bill, which would normally have taken about a year. Ashurst was represented on the experts' group, which provided assistance to the government during this period. Parliament approved the Bill in just over 5 weeks5. CIGA became law on 26 June 2020 and introduced two new restructuring procedures - the restructuring plan under Part 26A of the Companies Act 2006 and a new standalone moratorium procedure under Part A1 of the Insolvency Act 1986 - as well as an ipso facto provision (which prohibits the termination of supply contracts on grounds of insolvency) and various temporary Covid-19 measures (such as restricting the use of winding up petitions between 27 April 2020 and 31 March 2021 (as extended from the original expiry date of 30 September)). Read our suite of briefings here. |
| 19 | The number of creditor schemes of arrangement this year compared to 11 in 20196 . Ashurst acted for Petra Diamonds US$ Treasury Plc and PGS ASA, which both launched schemes of arrangement at the end of 2020. In contrast, the number of administrations in Q1 to Q3 of 2020 was 1,185, markedly lower than the 1,349 administrations for the same period in 20197. |
| 30 | The number of landlord CVAs proposed by high street name retailers and hospitality companies since June 2020 compared with 4 for the same period in 20198 . The landlord CVAs of 2020 differ from their 2019 predecessors: future rents are often calculated solely by reference to store turnover, some have incorporated rent-free provisions which kick in during future lock-downs, and many have imposed swathing compromises of the large amount of accrued arrears of commercial property rent. |
| Around 800 | The number of Carluccio's employees who escaped redundancy in May after the restaurant chain had gone into administration at the start of the first lock-down and its business was transferred to a buyer. The sale was made possible by an urgent High Court judgment (briefing available here), which, together with the Debenhams judgment, provided necessary clarification on the interaction between the furlough scheme and the adoption of employment contracts by administrators. This provided breathing space to enable the administrators to keep the staff on furlough under the government's Coronavirus Job Retention Scheme while marketing and selling the business. Ashurst acted for the administrators. |
| £800,000 | The new maximum prescribed part, increased from £600,000, which applies to recoveries subject to floating charges created from 6 April 2020. The minimum debt for a winding up petition remains at £750, unchanged since 1986. |
| 8.9m | The number of people who were furloughed as part of the government scheme at its peak in May 20209 . The Office for Budget Responsibility estimates that the Coronavirus Job Retention Scheme will have a net cost of £55.5 billion over the lifetime of the scheme10. |
| £975m | The value of convertible loans approved under the Future Fund11, which aims to address the potential economic impacts of Covid-19 by providing funding to innovative high-growth firms in some of the most dynamic sectors of the UK economy – ranging from tech to life sciences – which have faced financial difficulties due to the pandemic. Ashurst advised HM Treasury on the launch of the fund. |
| £4.5bn | The British Property Federation estimate of the accrued arrears of commercial property rent in 202012 resulting from the Covid-19 crisis and the restriction of landlord remedies imposed by the government to protect commercial tenants. These measures included prohibiting forfeiture and commercial rent arrears recovery, and restricting winding-up petition remedies. Read our latest client briefing on the extension of these measures here. |
| £28.2bn | Estimate of the amount of VAT falling due between March and June 2020 agreed to be deferred by HMRC to 31 March 202113. Where a company enters insolvency, HMRC will now rank ahead of floating charge holders and unsecured creditors for VAT and certain other withholding taxes as a result of the recent reintroduction of Crown Preference. See our client briefing here. |
| £68bn | The amount loaned to over 1 million businesses under the three government-guaranteed coronavirus business loan schemes14. The Office for Budget Responsibility has estimated that 40% of BBLS borrowers might default, compared with 10% each for CBILS and CLBILS, with the latest estimate of expected calls under the government guarantees being £29.5 billion15 . Novel restructuring solutions will be required as we head into 2021 with this unsustainable debt mountain. Ashurst was named most innovative law firm of the year at the British Legal Technology Awards 2020 in recognition of its role in advising Santander in relation to the delivery and implementation of an end-to-end CBILS solution. |
| £280bn | The amount the government has spent on Covid-19 support for public services, households and businesses16. |
We hope that 2021 heralds a more positive set of numbers for us all, and look forward to working with you next year.
1. https://www.bbc.co.uk/news/entertainment-arts-55016543 and https://languages.oup.com/word-of-the-year/
2. https://www.ons.gov.uk/economy/grossdomesticproductgdp/timeseries/ihyq/qna
3. -11.1% is the average of independent forecasts for the UK economy submitted to HM Treasury – see here: https://www.gov.uk/government/statistics/forecasts-for-the-uk-economy-december-2020
4. https://www.ft.com/content/5d100427-cc85-4b78-ae65-580a450ac503
5. https://services.parliament.uk/Bills/2019-21/corporateinsolvencyandgovernance/stages.html
6. In 2020, schemes of arrangement have been launched by: PGS ASA, Deepocean 1 UK Ltd, Sunbird Business Services Limited, Hertz UK Receivables Ltd, Petra Diamonds US$ Treasury plc, Steinhoff International Holdings NV, Swissport Fuelling Ltd (two schemes sanctioned), KCA Deutag UK Finance plc, Selecta Finance UK Ltd, New Look Financing plc, Codere Finance 2 (UK) Ltd, ED&F Man Treasury Management plc, Hema UK I Ltd, ColourOz Investment 2 LLC, Matalan Finance plc, African Minerals Ltd, Castle Trust Direct plc, Dundee Pikco Ltd. The 2019 schemes were: Agrokor DD, Flybe Group Plc, New Look Secured Issuer Plc, New Look Ltd, NN2 Newco Ltd, Syncreon Group B.V., Syncreon Automotive (UK) Ltd, Instant Cash Loans Ltd, Thomas Cook Group Plc, Amryt Pharma Plc and Lecta Paper UK Ltd.
7. https://www.gov.uk/government/statistics/company-insolvency-statistics-july-to-september-2020
8. From June 2020 onwards CVAs have been proposed by the following: Poundstretcher Limited, All Saints Retail Limited, Beaconsfield Footwear Limited, BMB Clothing Limited, Buzz Group Limited, Itsu Limited, Genus UK Limited, PizzaExpress (Restaurants) Limited, New Look Retailers Limited, Robinson Webster (Holdings) Limited, Yo! Sushi UK LTD, Wasabi Co. Ltd, Pizza Hut (U.K.) Limited, Gusto Restaurants Limited, Pastry Boys Limited (formerly Tart London Limited), Thai Leisure Group Limited, Busaba Eathai Limited, Archant Community Media Limited, Iberica Food & Culture Limited, Aspinal of London Limited, Wahaca Restaurants Limited, Revolution Bars Limited, Caffe Nero Group Holdings Ltd, LK Bennett Fashion Limited, Aspinal of London Group Limited, Moss Bros Group Limited, Ann Summers Ltd., Bleeding Heart Restaurant Limited, Leon Restaurants Limited.
9. From 'Main points' in https://www.gov.uk/government/publications/coronavirus-job-retention-scheme-statistics-december-2020/coronavirus-job-retention-scheme-statistics-december-2020
10. Paragraph A7 of http://cdn.obr.uk/CCS1020397650-001_OBR-November2020-EFO-v2-Web-accessible.pdf
11. https://www.gov.uk/government/collections/hm-treasury-coronavirus-covid-19-business-loan-scheme-statistics
12. https://www.standard.co.uk/business/business-news/landlords-slam-increasing-use-of-cvas-on-high-street-b69467.html
13. https://www.gov.uk/government/collections/hmrc-coronavirus-covid-19-statistics
14. £19.64bn under Coronavirus Business Interruption Loan Schemes (CBILS), £4.97bn under Coronavirus Large Business Interruption Loan Schemes (CLBILS) and £43.54bn under Bounce Back Loan Scheme (BBLS) – all as at the date of the last publication on 17 December 2020: https://www.gov.uk/government/collections/hm-treasury-coronavirus-covid-19-business-loan-scheme-statistics
15. See page 24 of https://researchbriefings.files.parliament.uk/documents/CBP-8906/CBP-8906.pdf and para A.11 at Annex A of http://cdn.obr.uk/CCS1020397650-001_OBR-November2020-EFO-v2-Web-accessible.pdf
16. http://cdn.obr.uk/CCS1020397650-001_OBR-November2020-EFO-v2-Web-accessible.pdf
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