Back to the Future
Posted on: 02 Jul, 20
Oury and Clark discuss going to work in this new COVID world
Morning, Clark What’s the matter? You’ve barely touched your Venti, non-fat, quadruple shot sugar-free, low salt, salted caramel, soya latte?
I know. I’m not feeling myself. It’s great that lockdown is slowly ending and things are getting back to normal, which is good, but there is just all this uncertainty. Running a business is uncertain enough as it is, but there are basic certainties you need but unfortunately, we don’t know if Covid will re-surface, if or when and if so, how bad it will be if it does. I mean look at Melbourne, Australia. We don’t know what the government’s reaction will be. All this uncertainty is making me so anxious! The last thing I need is caffeine!
Uncertainty is the new certainty.
Ooh! You’re very philosophical this morning! You’re right though, It certainly is not going away.
Yes, but you don’t need to be so fatalistic, there’s still plenty you can do to prepare for it all.
Like what?
First of all, you need cash—a war chest. And the government is handing out money to lighten the impact.
And that’s going to lead to inflation.
Well, maybe. Maybe not. But there’s nothing you can do about that. It’s beyond your control.
You sound like my yoga instructor! Next, you’ll be telling me I just need to “breathe” and control the controllables!
You do need to “breathe” and control the controllables!
Aagh.
Have you looked at the various schemes, Clark?
I have actually. In some detail. There are CBILs. and the bounce back loans.
CBILs? That sounds like something that’s only legal in Holland!
Coronavirus Business Interruption Loan Schemes.
Catchy.
Not as catchy as Corona! Anyway, The bounce back loans have been well received. And with the exception of a few banks we won’t name (cough “Barclays… and good luck with Metro too..”) – people were able to apply quickly and easily online– and got their money in 48 hours or less into their bank account. 7 questions. Easy peasy. Robert is your father’s brother.
It’s a lifeline for so many – I mean seriously – I know dozens of companies that I work with that really appreciated this cash. You have to remember though you can’t use it for anything. Can’t fund debts, pay bonuses, and be careful using it for overseas operations. Also because it’s the lower of £50k or 25% of turnover – maybe didn’t get as much as they hoped.
What about these CBILS though? Many say they were not allowed to apply because they are caught by the “undertaking in difficulty” rule… it’s a rule from the EU which means that if you spent half your share capital…
Whoa whoa – Mr Lawyer, let me do the tax. You have hit on a really key point. Okay. First of all… The “undertaking in difficult” rule which is to do with EU law might be scrapped. Second, the banks do not like this scheme. And what’s to like? They are 20% at risk on companies they would never normally lend to. Yes fine, if you only want £250k then there are no personal guarantees and they will try to be understanding. But not if they can avoid it. If you were not making money before the crisis – and cannot tell a very convincing story of when you will after… Then they are not going to lend you money. This isn’t venture capitalist. It’s a bank. If it’s venture funds you seek – you should go look at the Future Fund (the really not very useful fund would be a better title). Or use our ASA agreement to go out and seek funding now, for future equity, and generally talk to VCs, angels, and family offices if you can.
Ok – Got it. Moody banks, who can’t be bothered. Been there. Got the cheque book
You got it. 2nd … AND THIS IS VERY IMPORTANT BUT VERY DULL
Okay no problem. I have strapped myself in and put on my boredom repellent hat.
Excellent… Okay…
Currently there is a rule that if you have share capital that has been at least half diminished on the 31st December 2019 you can’t get CBILS..
So say… our share capital is £2m
and our OTHER RESERVES (basically your profit and loss from year to year) – is (-£1.2m)
boom=£0.8m… is the balance of value left.. and that’s more than half of my share capital (£2m)
If that’s true, sorry no CBILS support.
Another example would be…
- (A) ACCUMULATED LOSSES : £1,666,866
- (B) SUBSCRIBED SHARE CAPITAL : £1,499,999
- (B) – (A)=(C) : £1,499,999 – £1,666,866=-£166,867
You have spent ALL of your share capital… not a cats chance in hell yeah?
RIGHT. PUNCHY STUFF. Okay… I mean I think. So how should it work?
Okay get ready
It actually… works like this
- (A) ACCUMULATED LOSSES : £1,666,866
- (B) SUBSCRIBED SHARE CAPITAL : £1,499,999
- (B) – (A) =(C) : £1,499,999 – £1,666,866=-£166,867
- (C) MUST NOT BE A NEGATIVE AMOUNT THAT EXCEEDS HALF OF (B)= £-166,687 < £749,999
So in this example… we have actually spent all of our share capital and some. But because the amount is less than half the negative of the total…(read it slowly) i.e. as long as you haven’t spent 1.5X your share capital – you are OK. How this company is surviving with a balance sheet like this, goodness only knows. But that is, actually, how it works. TELL THE PEOPLE.
No way – okay that was erm… not interesting exactly. Sort of very dull. Anyway… so what else…
Let’s talk about furlough and what happens when it ends. ‘Cos… This is not a Charles Dickens novel! Although if a business really needs to trim to survive you’d have no choice but to make staff redundant. The government may consider legislation obliging you to employ people if you furlough them, but not sure how likely this will be.
That’s right. You have to make them redundant – and if they’ve been with you over two years, there’ll be redundancy to pay too. Think ahead as making someone redundant can take time. But, it’s just been announced that there will be a job retention bonus for employers who bring furloughed staff back to work, so hopefully this will be enough to encourage employers not to have to make redundancies.
You may need to reduce salaries. Now you can bring people back from furlough for shorter periods of time you may rotate employees on and off – like a rota.
Now there is more flexibility in this regards, employers can be a bit more creative in this respect.
I’m glad to hear that. Before all this happened I thought “Furlough” was a small lake in the West of Ireland.
I’ve got all the answers by heart. Do you know what Oury
- You can accrue annual leave during furlough.
- Leave can be taken during furlough.
- You can even require an employee to take his or her leave during furlough. Or you can require them to take it once the furlough comes to an end.
- As for pay when taking annual leave during a furlough, the first 20 days should be at full pay. After that you might be able to agree that additional holiday is at the furlough rate, but from an industrial relations perspective it’s probably best to pay the full rate.
- If the employee has pre-arranged to take annual leave during furlough, they can take it and they can only cancel if the employer agrees.
- If someone gets sick while on furlough they may as well stay on furlough – they get more than on standard SSP.
- Employers can stay in touch with employees during furlough.
Wow you really know your stuff! You should do a rap about it so that it really sinks in … Furlough rhymes with “ho” that’s already a good start!
I’ll leave that to you!
One thing. I think employers should take advantage of it. It’s a good time for staff training, for example
Yes. Good point.
You know what gets me though. The online furlough portal.
It’s a NIGHTMARE
Why do they make these things so complicated! It’s so difficult to amend claims.
It has an automated log out after 30 minutes which does your head in if you’re making claims for lots of staff. You’ve got have your phone on because sometimes they ring you you to check security. They calculate it on a 7-day week, not a 5 day week which adds to the complexity… I’d rather do Chinese algebra!
Who designs this stuff… Seventh Circle of Hell Software inc?
Something else Oury
What?
Have you got a will?
I think so.
You think so! Do you know how difficult you’re making it for your loved ones by not having a will?
Well, to be honest I wasn’t planning on dying anytime soon …
That’s really irresponsible, particularly with Covid flying about. You need a will. You need a Power of Attorney in place. Some kind of insurance or life cover too. Do that – as a priority – tomorrow.
Right ho… but I’m fairly fit and healthy …sometimes I wear ankle weights when I’m walking the dog. Do you know something that I don’t? Has someone really got it in for me in the office?
These are unusual times. Covid, Brexit, a shall we say eccentric US president, China dependency, a recession or possible depression. All these riots, extinction rebellion, Black Lives Matter, tearing down statues. I don’t know where it all goes.
Only worry about what you can affect… be present in the moment, just let go…
Indeed! Let go of all this silliness and go and get a will!.
I do think there are certain things you can make judgements about. Like however this goes more people are going to be working remotely. And it’s much easier to open an office outside of a city where people can for example drive to work. So companies with large city premises are going to be thinking – we don’t need this.
People are still going to have to work together. Especially in manufacturing.
Yes. We are social beings after all. Or most of us are.
There is also a collaborative advantage of being together that you lose by remote working. When have you ever warmed to someone over a Zoom call?
Depends on what books are on their shelf.
Oury does the workforce need to be in cities any more?
Does it even need to be in UK?
Good point. Even so, never underestimate the power of cities, or the power of London. It has a habit of proving everybody wrong.
“The man who can dominate a London dinner table can dominate the world”
Wow did you make that up?
No, but close … it’s Oscar Wilde.
We are not going back to normal. Uncertainty is permanent.
At least for the time being.
We’ll be much more aware of germs. Thankfully I don’t have to hug my sister in-law anymore, People will use things like bikes, and electric bikes, and these annoying scooters that people go to fast on the pavement on – safer forms of transport.
But they’ll be moving as lockdown measures are lifted.
I think this lock down has led to a lot of mental health issues. Both individually and collectively.
Now who’s the philosopher! Let’s save that for another day.
Tourism is going to change, the leisure industry, business travel, entertainment … I’m uncomfortable enough as it is in the theatre without having to worry about catching covid.
Well, not to worry, at least you’ve been practicing social distancing naturally for years! HS2 will go ahead. They’ll need big infrastructure projects. Even if it’s totally the wrong model for the times.
You know – I think privacy is an issue too.
You’re worried about privacy! Why is it that those who are most worried about privacy always seem to lead the most boring lives!
Are you talking about me?!
Em… no… not at all… so you’re worried about the Government spying on you via Covid track and trace apps?
Well, yes, That. But also things like Zoom aren’t that private. People will want to meet in person. We can’t lose that.
That’s the contradiction. We want to be together. But we can’t… it’s almost as romantic as Romeo and Julliet!
This is a global problem. Lots of innovation is required. Covid has accelerated so many things. We are not going back.
We are going back – Back to the Future.
I thought you’d say that but if you’re up for it, why don’t we have a socially distanced catch up and “eat out to help out”. We’re being offered 50% off certain meals in August.
I’m up for it, although there are conditions, but let’s just wait and see what they are!
Disclaimer
We are but two fictitious characters throwing out ideas and comment to stimulate debate and collect information. As professional service firms, we are open-minded people and think independent thought and debate are essential to help us understand as well as navigate complex problems. By joves – doing business across Europe (and the world) is set to become a whole lot more complex in light of recent seismic political events. As businesses – we provide information and hopefully some wisdom – and we see this blog and its caricatures merely as a much more fun, perhaps slightly controversial, way of stimulating debate and collecting ideas. We’re searching for some true pearls of wisdom, and as we find them, we’ll share them with you.
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