There is no doubt the UK is heading into a significant recession. This will mean a large increase in businesses and households in financial distress. This is already visible in data, such as the latest Begbies Traynor red flag report, showing 37% more businesses are in critical financial distress compared to last summer. There are also the latest Insolvency Service statistics, showing company insolvencies are already at the highest for a decade.
This is only going to worsen for the next 12-18 months. Unlike the financial crisis, this recession will play out via the squeeze on household finances, particularly exposing sectors dependent on consumer spending.
Turnaround specialists and Restructuring & Insolvency lawyers are gearing up for a busy time salvaging jobs and saving businesses where possible. It is sometimes overlooked that reputation management is also a vital consideration – particularly in distressed asset and contentious restructuring scenarios.
Senior executives of companies in trouble will often see their reputations and integrity attacked. Jobs are being lost, creditors want paying, shareholders are furious at being wiped out, litigation is on the horizon and journalists are circling, often being fed information by unhappy stakeholders or whistleblowers.
Companies with complex ownership or debt structures, or which have received investment from the public sector are particularly exposed. There may be allegations of misconduct or even fraud by senior management, regardless of truth. Disgruntled parties will go to the press with their own agenda and if they set the public narrative it can play havoc with efforts to save a company.
It may be a cliché but leaders of distressed companies must get communications advice as early as possible, whether they are existing management or newly appointed by equity or debt to turn a situation around.
The tendency can be to say nothing because for fear of making things worse or to say too much and take responsibility for too much, rather than finding a clear set of messages grounded in facts and the reality of the situation, and sticking to them.
Getting the communications right can preserve corporate and individual reputations, and positively impact lender decisions when it comes to securing waivers or negotiating refinancing.
So don’t wait for a journalist to call before thinking about PR, no matter how stressful or difficult the situation might be.