Struggling SMEs set to get bills paid by Government to help future survival

Failing companies with a chance of survival could be set to handed an extra lifeline through a new Government guarantee, which would protect the supply of essential services allowing them to continue to trade during rescue talks.

Essential IT like broadband  alongside water, gas and electricity supplies will be covered by measures announced yesterday.

Jo Swinson, business minister, said suppliers would be prevented from cutting off, or increasing charges, on essential services during rescue talks.

They will be guaranteed payment ahead of other creditors providing services during that time and can ask for guarantees of payments from insolvency practitioners.

The government has already introduced legislation through the Enterprise and Regulatory Reform Act to prevent suppliers withdrawing essential services after a company enters administration but it was found the measures did not go far enough in providing a balanced coverage.

Suppliers can also apply for extra safeguards. They will have the right to terminate business if post-insolvency supplies remain unpaid for more than 28 days.

Speaking about the changes Swinson said: “Rescuing struggling but viable businesses out of insolvency helps saves jobs and improves the likelihood of payment to those owed money.”

The changes, due to come into force in October, have been welcomed by the insolvency profession.