A big spike in Debt Recovery action is expected following the end of temporary measures introduced by the government to help bolster Small Businesses during the pandemic.
The Government introduced the Corporate Insolvency and Governance Act 2020 (CIGA) in March 2020 to help companies to stay afloat during the pandemic and to protect them from aggressive action from creditors.
From March 2020 to September 2021, CIGA sought to temporarily suspend parts of insolvency law by putting a ban on statutory demands being presented over a ‘relevant period’ and stopping people from presenting a winding up petition against a company unless the creditor could prove that the company had not been impacted by Covid.
The restrictions were relaxed in October 2021, however, landlords were still completely prohibited from using the insolvency procedure, and other creditors could only issue winding up petitions if the debt was over £10,000.
In the coming months, it is expected that a lot of companies will be needing debt recovery help to recover what they are owed. Experts predict we will see an upturn in winding up petitions made by those who have debts of under £10,000, and from landlords who have been excluded from using the procedure.
The Government has helped thousands of companies to stay afloat by introducing CIGA but now they have ended the protections to tenants and debtors we are expecting a massive influx of people trying to get money they are owed. Those debtors who have been hiding behind CIGA will no longer be able to do so.
Whilst the temporary Covid laws may have ‘saved’ many businesses. At the same time, they will have prevented other businesses from rightfully collecting what they owed.
A large increase in Small Business Debt Collection activity will more than likely see an increase in insolvencies in the short term. Hundreds and thousands of Small Businesses in the UK work with Debt Collection Agencies to ensure their enterprises remain proftiable.