Restructuring UK plc 2020/21

As you may have noticed, UK Plc is in a very sickly state. The first impact of Covid-19 was to push over the edge a whole bunch of companies that were teetering on the brink anyway - like Flybe as a prime example. The casual dining sector, hugely oversupplied, had been struggling and now we are seeing barely any chain survive with nearly all of the either in administration or about to be, like Prezzo.

I don't think many of these dining options are going to do much damage to the overall economy, we did not need 3,000 variations on pasta and burgers to really push on in the 21st Century.

However, what is harder, notably for the retail sector but also SME's, is that the rent holidays and mortgage holidays are all going to come to an end in the next few months, along with the need to increase contribution to the furlough scheme.

These extra costs are a huge debt burden on businesses, some of whom may bounce back on pent up demand, but others who thanks to social distancing, will suffer continued slow business. But this slow business will be under the added debt burden above.

This wont be sustainable for many businesses in the medium term. In the short-term many will try to struggle on, but sooner or later the owners will try the administration route or end up in insolvency.

Much of the lending has been arranged by the British Business Bank, which has worked with the clearing banks to distribute the interest-free Government loans.

At the moment and considering the above, a huge chunk of this is going to have to be written off if the businesses fail. Which leads me to the conclusion that in order to keep businesses going why not write-off a big chunk anyway, before the businesses go under?

This will be difficult politically to achieve, but either the Government takes on the debt or the private economy will be ruined - so in a different way to 2008, but with a similar outcome. History does not repeat but it does rhyme. Last time the Government bailed out the banks, this time it will have to be businesses directly.