2021, more of the same?
Stop, go. Stop, go, go, GO… STOP!
Almost everyone that I spoke to in a professional capacity in the latter half of 2020 was extremely busy. Describing how they were finding things, ‘crazy’, ‘manic’ and ‘as busy as I have ever been’ were par for the course in the advisory community. The impending Brexit deadline was looming, it felt like the furlough rules were changing weekly, investments via Future Fund and/or the Coronavirus Enterprise Investment Fund for early stage companies were being explored, more established businesses were considering Bounceback and Coronavirus Business Interruption Loan Scheme facilities and, and, and… you get the gist.
In addition to those workstreams borne from the need for ‘rescue’, for many businesses the lockdowns that we have become all too familiar with have resulted in significant revenue increases. In these instances, the pandemic has brought forward the need for their product or service in the marketplace or has resulted in a need to accelerate their modernisation and/or investment plans to service the ‘New World’. Although you would argue any such implications are largely positive, they inevitably bring with them their own associated difficulties. The pandemic compounded with the impact of Brexit has meant that in many instances supply chains are far from as slick as they once were, breakdowns here inevitably leading to frustration and complaint at best and at worst to costly disputes. In the last quarter of last year, we found that much more of our work than, for our clients’ sake, we ever like to be involved in was emanating from commercial disputes whether that be shareholder fall outs, debt recovery and/or supply chain issues.
Trends
Despite all of the problems 2020 brought with it, we have still seen and continue to see some significant transactions taking place in the mergers and acquisition space. The private investment landscape seems also to be particularly buoyant right now, the availability of match funding from Co-Fund and CEIF making it appealing for early stage companies to take additional investment on board. Private investors are arguably spoilt for choice here in Northern Ireland, with many ‘start ups’ ticking the boxes that such investors typically look for. Similarly to the attitude of borrowers where the Bounceback and CIBLS facilities are concerned, many appear to be taking the view that cash is ‘better to have than not’ right now For a significant number of others, however, it is a case of needs must.
We found that the initial slowdown and uncertainty caused by the early lockdowns gave many businesses an opportunity to review their current arrangements. We saw a lot of companies revisit, for example, their terms and conditions, put in place their shareholders’ agreements and related shareholder protection policies that may have been discussed at length previously but were not a priority until now.
As regards investment propositions for high net worths, in addition to working on investments in some of the fantastic homegrown tech companies that we in Northern Ireland can boast, we have also seen some very interesting projects related to the worldwide rise in popularity of Irish whiskey. In the past 10 years, the number of distilleries operating in Ireland has increased eight-fold but even then, the Irish whiskey market is only around half the size of that for Scotch whisky in the U.S. at the moment. All of this would suggest that it is an area with significant growth potential.
We are also encouraged by the activity of our construction clients, who for now appear largely optimistic about what the next 12 to 24 months have in store. We are seeing a variety of private and social housing developments, with finance arrangements being obviously project dependent. We are also finding that this continues to be a sector in which alternative funders are seeing value.
Due to the uncertainty around what Brexit would ultimately look like, many businesses are only now understanding the what the implications of Great Britain’s withdrawal from the EU are for matters such as terms and conditions of supply, data protection obligations etc. With the new administrative requirements for trade between Great Britain and Northern Ireland, it is critical that businesses have a clear understanding of what this all means for them. ICC Incoterms 2020 have recently been introduced and must be a starting point for many who are trading internationally.
What next?
Outside of the hospitality industry which, aside from a very few but significant success stories, is regrettably on its knees at the moment, we have largely found our clients’ businesses to be remarkably resilient. Despite the latest lockdown, we expect that to continue for the most part through the first quarter of 2021. While activity may not be exactly thriving for many throughout Northern Ireland and Great Britain, to be alive and kicking at this point is somewhat of an achievement in itself as we approach the first anniversary of the lockdown in March 2020.
From an economic activity perspective, it looks like it will be another very active period for ourselves and the professional advisory community as a whole. It will be interesting also to see what the UK Budget on 3 March 2021 has in store. Commentary around what may or may not come to pass includes matters such as a further extension to the stamp duty holiday, a rise in corporation tax rates, renewal of the VAT cut (5%) for the hospitality sector and a potential increase in capital gains tax which all makes for one of the most anticipated budgets in a number of years. While much of this might be ‘crystal ball gazing’, now may be the time for many businesses to consider their current structures and any mechanisms that may be available to them to protect what wealth they may have accumulated and/or to implement any succession planning that they might have been considering. We would urge businesses and individuals to stay close to the commentary around this as it develops over the coming weeks and if, on balance, they feel that they could be impacted significantly by any of those matters I refer to above or other potential changes they should start to consider what, if anything, might be prudent in the circumstances. As I allude to above, many professional advisors are already stretched and it will be key therefore for anyone concerned to get the ball roiling on these critical conversations sooner rather than later.
John Turley, Director
Turley Legal
28 January 2021