Food manufacturing is one of the sectors that perhaps doesn’t hit the headlines as much as other industries but behind the scenes, people are worried. The latest figures from the Food and Drink Federation paints a stark picture, with business confidence plummeting to -64%, equal to sentiment recorded during Covid-19.
The reason for this despair? Unfortunately, it’s an all-too familiar set of problems. Issues include rising production costs – due to high energy bills, rising wages and soaring ingredient costs – along with supply chain disruptions attributed to geological tensions in the Middle East, and collapsing consumer demand as households face a financial crisis and are forced to rethink the products and brands that make it into the weekly shop.
The road leading to insolvency
No business ever plans to not pay tax or to fall behind on their obligations to suppliers but sometimes, things spiral out of control and money floods out the door faster than it comes in. Often, that imbalance is down to external factors – such as a huge hike in input costs, and a global conflict pushing up the price of oil and other energy products.
This was exactly the case for our client, a London-based food manufacturer that was slowly being swallowed up by debt. When the business owner found the Boardroom Punks, it was clear that time had run out. The manufacturing firm was in dire straights with £70,000 showing as owed on the VAT account, a £250,000 deficit on PAYE payments and a crushing £350,000 owed to the energy supplier.
The situation had escalated to such an extent, the energy company had decided to stop providing a service to the manufacturing plant, leaving the business stranded without a vital fuel source to power food preparation and production. On top of this, the owner had a team of 24 staff that all had families, rent and mortgages to pay, and food to buy.
As we see time and time again, the business owner had done everything he possibly could to turn the tide and had undertaken huge amounts of personal debt to pump money back into the business, after inheriting the situation from a previous owner.
We were clear that going through insolvency was the best course of action. We handled the whole process, presenting information to the liquidator and working with them to ensure that jobs were saved and the debt was written off.
Happily, this process was a lifeline for the business and it’s now in a much stronger, much healthier position. Most importantly, all 24 people who worked at the manufacturing facility continue to earn a monthly wage so they can keep a roof over their heads and food on the family table. Today, that business is a great example of what’s possible. It is in a much better place, pays all of its VAT and other taxes on time, employs a small team of people and is contributing positively to the sector and its local economy.
If you’ve exhausted every avenue and would like to discuss business insolvency, we can offer expert support. We specialise in turning around struggling businesses and returning them to profitability – and we always prioritise saving jobs. Contact us on 0800 433 7016 for a free consultation.
