Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No. 2) Regulations 2021

Seema Malhotra Excerpts

Monday 6th September 2021 General Committees

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Sir Gary. Labour welcomes this extension to schedule 10 of the Corporate Insolvency and Governance Act 2020, having worked previously both privately and publicly to extend the time period for the provisions, which were also supported by my predecessor, my hon. Friend the Member for Manchester Central (Lucy Powell). I agree with the Minister that those businesses that can pay their debts should do so, but this was an important step to support and protect otherwise viable businesses from, as he alluded to, aggressive creditors seeking to use statutory demands and winding-up petitions to recover debt and trigger insolvency procedures.

Although we are starting slowly to emerge from the pandemic, businesses up and down the country still face significant challenges. The supply chain crisis is now seriously disrupting the flow of goods to and from businesses, with covid being one of the several underlying causes in the UK and abroad. We have called for measures to tackle that urgently, with a new five-point plan that Members may have seen over the weekend, step 1 of which is a dedicated Minister to lead and co-ordinate efforts across Departments to tackle those issues and support business recovery. Staff shortages have forced businesses either to reduce the amount that they are open or, indeed, to close. In July, around £6 billion-worth of debt accrued during the crisis was owed to commercial landlords.

It is right that businesses facing financial difficulties continue to receive support. Although we may have, thankfully—we hope—passed the worst of the pandemic, our economic recovery is still subject to uncertainties and challenges, particularly in the months and years ahead. There are still huge hurdles for businesses, and the recovery is not equal across all sectors. We must not remove our support and let viable businesses fall at the last moment. Many small businesses, particularly in aerospace, aviation, steel, hospitality, travel, tourism, culture and retail—many sectors that may have started in recent weeks to see demand increase—will still be experiencing particular issues and, in many cases, a cash crisis.

That brings me to the key issue with the extension, which obviously we support. It is similar to the issue raised by my predecessor. How do we know that 30 September is the right time to end the support? What assessment has been done in choosing that as the right time? What evidence do the Government have that otherwise strong businesses will not continue to face financial difficulties after September, especially given the ongoing covid-related staff shortages and the supply chain problems that I have highlighted? The Government must not let previous covid support end up being for nothing by pulling away the provisions, sometimes too early, causing businesses to suffer at the last moment. We want to understand what the evidence is for the end of September as the new, extended, date.

A significant amount of the debt that businesses face comes from owed rent. Despite the commercial rent moratorium, landlords could still attempt to recoup rent from businesses by serving statutory demands and, subsequently, winding-up petitions. Schedule 10 of the 2020 Act, as the Minister alluded to, rendered statutory demands served on companies during the relevant period effectively void. Once the provisions are brought to an end, how will the Government support businesses that may face rent-based statutory demands and winding-up petitions?

The rent moratorium may be in place until March 2022, but how does that sit alongside the ending of the protections in schedule 10? It seems that from 1 October a landlord will not be able to evict a commercial tenant but will be able to seek to have the tenant liquidated through a winding-up petition. Do the Government recognise that there is a paradox in that? They are legislating for businesses to be protected from eviction but not from rent-induced liquidation. It would be very helpful to understand how some of those policies fit together, or indeed whether there is a contradiction.

People up and down the country might be enjoying the lifting of restrictions, with the caution that is certainly being encouraged still, but we must not pretend that businesses are no longer struggling or no longer need support. There will be a particularly difficult hit as furlough comes to an end, giving businesses a double whammy of reduced support and protection at the same time. Labour therefore supports the extension of these important provisions, but we seek assurances and detail from the Government on why the extension is to the end of September, and what the Minister assesses the situation for businesses will be from October onwards.

May I also ask what more the Government are doing, as the Minister alluded to, in terms of advice and support from insolvency professionals? What are the Government doing to ensure that businesses can seek and get good early advice on addressing debt repayment, so that insolvencies that can be avoided in the next year, are avoided? We must not pull that support too early and let viable businesses fall at the last hurdle, with the pathway to recovery still uneven for many different businesses and sectors.