Tue, Jul 27, 2021

Upside - Summer 2021

Welcome to Our Summer Edition of Upside

In this latest edition of Upside, I will not dwell too much on the broader economic impact of the Covid-19 pandemic. My colleagues from across the business will pick that up in greater detail as we examine the challenges – and opportunities – this unprecedented period has created. It has indeed, however, been a chapter in our lives like no other.

As we entered 2021, we underwent our own transformation.  The Duff & Phelps name established in 1932 has become arguably one of the best-known brands in the global corporate landscape – Kroll.

This is without doubt one of the most exciting journeys we have been on as a business.  Kroll itself as many of you know, has been operating for decades.  In 2018 it was acquired by Duff & Phelps as a major strategic investment.  Today the firm as a whole has been rebranded Kroll and the new name and logo represent the firm’s rich history and breadth of services, delivering transparency, trust and objectivity to clients.

For UK restructuring, the changes have not stopped there. In February of this year, we promoted 20 colleagues throughout the business and Rob Halliday passed the JIEB exams, Alex Houghton fully completed his professional ACCA exams and Nick Thompson completed the Australian equivalent - the CA ANZ qualification. We also announced the promotion of four existing senior directors within the UK restructuring team to the role of Managing Director.

The internal promotions of Eddie Bines, Martin Gray, Mike Lennon and Jimmy Saunders and the hiring of Kris Carpen as Senior Director occurred on the heels of our announcement late last year following the acquisition of Borrelli Walsh, which in turn has significantly expanded our global restructuring team.

Back in March of this year we ran the first of what is expected to be a series of webinars, hosted by the former government minister Michael Portillo. The theme was One year on from lockdown and we chose to poll the 400 attendees on their sentiment toward the economy and how long they believed it would take to bounce back.

The result was unexpected as almost three-quarters of those we asked thought it would take between two to five years to see the economy return to the same level as 2019. The figures are at odds with the government’s budget watchdog, the Office for Budget Responsibility (OBR), which predicted the UK’s GDP will return to pre-crisis levels by the middle of 2022. Clearly business sentiment is not as bullish as the government’s.

Why is this? We are seeing two major trends. The first is the most obvious and for many businesses, the most pressing.  Government support is coming to an end. Businesses now need to commence repayment of the CBIL/CIBILS and Bounce Back Loans alongside the agreed HMRC TTP arrangements. Many balance sheets and equity value have been eroded and the accrued liabilities need to be repaid.

The second broad trend now bubbling to the surface is supply chain stress.  This is more than just about a boat stuck in the Suez Canal or delays in the production of microchips impacting manufacturing, as many sectors are now reporting issues.

Aerospace and automotive are already seeing delays throughout the supply chain as a direct result of the chip shortage, and in May the UK construction sector reported that due to timber and raw material shortages, the housing sector is now facing considerable stress.  Whether this is down to Brexit or the pandemic is a moot point. Faltering availability and rising costs are now a major concern for many business sectors.

There is now no doubt that the overall number of company insolvencies since the start of lockdown last year has been impacted by the range of government measures put in place. The latest data shows that company administrations have fallen 56% for the first six months of 2021 when compared to the pre-covid 2019 statistics.

The UK government has been keen to avoid a ‘cliff edge’ for businesses falling into insolvency when temporary relief measures come to an end. We examine these throughout this edition of Upside, taking particular note of the impact of the extension of temporary measures, as well as the changes made to wrongful trading and the recent announcements made on rent moratoriums. While some would argue that this is a pragmatic policy to protect businesses, others are taking a view that this is no more than delaying the inevitable need to restructure.

This year has much in store and no doubt I will be reporting back in the final quarter on how the rest of 2021 panned out. While we are busy - expanding in Birmingham with new offices coming online - and with a new name and logo and new dedicated website for UK restructuring, the one thing I can say with any confidence is that this year’s continued uncertainty remains. 

As we leave lockdown, Kroll will continue to take the health of its teams and clients seriously. We are rolling out a dedicated app to all employees in the UK as we move towards a flexible working model. This means we can manage the number of people in any one office on any one day.  We believe this change to a more agile, hybrid working approach will be of long-term benefit to us all. In the meantime, our teams are here and ready to help.

David Fleming 
Managing Director 
UK Head of Restructuring