Financial Reporting Requirements Eased In The UK On Account Of The Pandemic

The FCA has extended its two-week moratorium on publication of financial statements of listed companies and has given extra two months to the already existing four-months’ time for the auditing and publication of the results from the financial year-end. While several reasons are being sighted for the same, the move will provide many companies with a much-needed breathing space to work through the deteriorating trading situation that has brought many to the point of severe financial stress. While the FCA’s temporary relief could definitely see a reduced impact on the share price performance of various companies on the bourses, by the time the companies will be able to publish their results, the numerous relief measures announced by the government and the Bank of England would have already been factored into their books. The government has announced a host of relief measures in the past few weeks to help businesses and ordinary citizens in the country overcome this massive public health emergency.

The advent of this pandemic has brought in with it several regressive forces that have battered the British industry in the past few months. First, when the news broke of the virus breakout in China, flights into and out of that country, as well as the movement of goods in and out of that country, were suspended. Several British companies who had large parts of their revenues originating from that region started to report profit and revenue warnings. Again, several engineering and other manufacturing companies in the country, which were heavily dependent on components from China also reported a halt in production activities due to unavailability of parts. Finally, when the pandemic did arrive in the country, it pushed the country to a massive lockdown. So, while all of this affected the manufacturing and trading companies in the country, the lockdown conditions impacted the audit and financial services industry’s ability to carry out their day-to-day work. Most of the major audit firms, which would do the hard number crunching of the companies, now were facing a severe shortage of staff, who were now locked up in their homes after the government order. Work from home arrangements, although it can help these companies to deliver, would slow down the pace of work to be delivered on time. Thus, keeping all this in mind, the decision of the FCA seems to be rightly placed.

This respite to the companies will certainly help them arrest a steep fall in their share prices as they get time to add more flab to their balance sheets from the many bailout schemes that have been announced by the government. It is very well estimated that given the massive economic impact the pandemic has brought with itself, there will be many companies who would not be able to withstand the onslaught. Responding to a myriad of requests from several companies and industry lobby groups asking for a bailout, the current Chancellor of the Exchequer, Rishi Sunak, has stated that it will not be possible for the government to save every company and had asked the Bank of England to extend its loan guarantee facility to only those companies which are found to be viable. Both the government and the Central bank have in the recent past enacted a slew of stimulus measures that are aimed at British companies sailing through the current choppy business conditions. Among these measures are included one massive public expenditure announcement worth £640 billion to rebuild the country’s old infrastructure and another massive business loan guarantee scheme worth £350 billion aimed at providing a lifeline to companies fight the current spate of a business slowdown.

Amongst the major companies which have been reporting major revenue drawdowns and production losses over the past few months are Heavy equipment manufacturer JCB which has sighted slowdown in its logistical cycle for the stoppage of production in its factories, as the company imports more than a quarter of its components from China. Similarly, car manufacturing company Volkswagen also announced cut in its production lines on account of a shortage of parts due to stoppage in arrivals from China. Consumer electronics company Haier also announced that it is short of stock on account of delayed arrivals. The number of companies who are caught in this situation is in the hundreds, and it is also highly unlikely to improve in the near future. The industry that has been affected the most because of this pandemic outbreak is the airline industry. Blamed for ferrying the virus across the world, the world airline industry is in a virtual shutdown mode. Domestic as well as international flights are flying at their bare minimum levels, and the industry has been counting its losses in millions every day, with the similar situation also being faced by other modes of transport as well. The cruise line industry, the hotel industry and the leisure industry are similarly also in the doldrums with each reporting drying up of the number of guests and cancellation of existing reservations.

It is also probable now that the British economy and major parts of the world economy may enter into a slowdown. British foreign trade, which is responsible for bringing in a significant amount of revenue for many of its businesses, may now be severely impacted. It is probable that some of these businesses may report massive losses for the current period. It is also equally important, however, that these businesses are also protected and not allowed to be swept away because of this pandemic. As and when the situation is brought under control, these businesses will be at the forefront of the country’s revival. The British government is also considering massive cash injection initiative to spruce up with the demand levels in the economy and help the ordinary folks during extended periods of unemployment. It has already allocated £30 billion towards payments of part of the salaries of staff of small and marginal businesses in the country who would not be able to attend work due to lockdown restrictions enforced by the government. The British establishment, thus, is making all possible arrangements so that the country can sit out this pandemic with minimal damage to the livelihoods of its citizens.

The Bank of England Deputy Governor and the Chief Executive of Prudential Regulation Authority (PRA) has asked banks in the country to consider all aspects of the measures being put forward by the government and the central bank in their statements to be finalized for their March/April final year and first quarter statements. These measures, he stated, are being taken to ensure that the banks continue to lend. At the same time, the country fights this pitched battle against the outbreak so that the country as a whole emerges victorious out of this situation.