Tim Carter, partner at Stevens & Bolton, has warned that many companies were enjoying “temporary relief” because of support such as the deferred tax payments and the Government’s furlough scheme. But he warned about the impact after lockdown measures were relaxed.
Carter raised concerns about the eating-out market and food suppliers if social distancing continued, saying: “The expectation is that we will see yet more businesses follow in Adelie’s footsteps.”
Food-to-go firm Adelie Foods went into administration, with 2,169 redundancies, after attempts to find a buyer failed. The joint administrators said they had been unable to secure a sale that would enable a rescue of the group as a going concern.
Carter said that Adelie Foods was one of many companies that had failed to negotiate the “tricky path” that lay ahead for the casual dining and food manufacturing sector.
He said there had already been a number of insolvencies from companies “teetering on the edge of survival” before this crisis, and that COVID-19 – and its sudden impact – had pushed them over the edge.
Carter said a number of businesses similar to Adelie were “in limbo” and enjoying “temporary relief” from cashflow and creditor pressures because of the bar on winding-up petitions, deferred tax payments and the government-backed furlough scheme.
“However, what happens when these temporary measures expire and the deferred payment of tax and employee salaries begins to bite and the market doesn’t pick up?” said Carter.
“With the anticipated lifting of the current lockdown restrictions by mid-summer, the legacy of social distancing is likely to continue and to have a longer-lasting effect on the casual dining sector, in particular. If restaurants and pubs don’t have sufficient through-flow of customers with enforced limited tables, they are at risk, as are their food suppliers, either because they fail completely or as a result of the reduced demand for such food supplies.”