While conflict in the Middle East continues to rage, every day that passes increases the chances of a full-blown global recession. Once again, the threat lies in severely disrupted global energy markets.
UK businesses have already begun quietly preparing contingency plans for a potential recession. The concern is less about the immediate shock and more about the cumulative effect of another energy-driven economic downturn on companies that have already endured years of instability following Covid, the war in Ukraine, and a prolonged period of weak consumer demand.
For firms across the UK, the starting point for planning is assuming that energy prices could see a further, sustained rise. Hedging and contract renegotiation have therefore become a priority. Many manufacturers and logistics firms are reviewing fixed-price energy agreements or seeking to extend them where possible, hoping to avoid the kind of sudden cost spikes seen in 2022. Others are exploring shorter-term purchasing strategies, designed to allow flexibility if prices fall but still provide protection against extreme volatility.
Cash-flow management is another priority for recession-proofing. Businesses in sectors such as retail, hospitality and construction — where margins are already wafer thin — are tightening working-capital controls and reviewing credit lines. Some companies are building larger cash buffers by slowing capital expenditure or postponing expansion projects. In many cases, investment plans that were beginning to return after the inflation shock of the past two years are now being reassessed.
Supply-chain resilience has also moved higher up the agenda. Companies dependent on imported materials are examining alternative suppliers, particularly within Europe, in case transport costs surge again due to higher fuel prices or shipping disruption. Some firms are increasing inventory levels of key inputs to guard against delays or price spikes. Although stockpiling ties up capital, it is increasingly viewed as a form of insurance against supply shocks.
Staffing decisions are another area where contingency planning is visible. Rather than immediate (and costly) layoffs, many businesses are focusing on flexible workforce strategies. This includes reducing overtime, slowing recruitment and increasing reliance on temporary contracts. The aim is to maintain operational capacity while retaining the ability to scale down costs quickly if demand weakens.
Retailers and hospitality operators are preparing for further pressure on consumer spending. Their contingency plans often involve adjusting product ranges, emphasising lower-cost offerings and promotional pricing. Some restaurant groups and food producers are redesigning menus to limit exposure to ingredients with volatile supply chains or energy-intensive production processes.
Pricing strategy is also under review. Many firms are wary of passing higher costs directly to customers after years of inflationary pressure. Instead, they are exploring more gradual price adjustments, smaller package sizes, or targeted increases on premium products where demand is less price-sensitive.
Financial planning is being shaped by uncertainty around interest rates. If energy prices surge again and inflation rises, expected interest-rate cuts from the Bank of England could be delayed. As a result, companies are stress-testing financial forecasts against scenarios in which borrowing costs remain elevated for longer than anticipated.
For already-stricken businesses — particularly on the UK high street — the goal is simply survival. Insolvencies remain high across several sectors, despite recent easing, and many companies remain financially fragile. Their contingency plans therefore focus on preserving liquidity, controlling costs and maintaining operational flexibility.
Whether those plans will ultimately be needed remains unclear. Much depends on how far energy prices rise and whether the conflict spreads. But for many UK businesses, the lesson of recent years is that global crises can rapidly translate into domestic economic shocks. Preparing early for the possibility of recession has therefore become not a pessimistic strategy, but a practical necessity.
All businesses facing severe cashflow pressures should seek professional advice on credit management, invoice discounting, overdraft planning, communicating with HMRC and contractual terms to minimise the impact of late payments.
UK tech at a crossroads
The UK government’s new £2.5bn commitment to artificial intelligence and quantum computing signals clear intent to position the country at the forefront of next-generation technologies. It is a welcome endorsement of the sector’s long-term potential. However, for many UK technology businesses, the more immediate challenge lies not in opportunity, but in navigating a materially more complex funding and operating environment.
Over the past decade, a significant proportion of investors – particularly in the technology space – have operated against a backdrop of relatively low interest rates and abundant capital. That environment has shifted. Companies are now facing a structurally higher cost of capital, and business models that were predicated on sustained access to low-cost funding are increasingly under pressure.
Valuations are also coming under greater scrutiny. Private equity and venture capital-backed businesses have, in many instances, benefited from upward valuation momentum that has not always been aligned with underlying performance or near-term cash generation. As market conditions tighten, that disconnect is beginning to narrow. For those reliant on bank debt, the position is further compounded by widening lender margins over base rates, reducing flexibility around funding growth initiatives.
In this context, while government investment provides an important signal of confidence, it is unlikely to offset the near-term pressures facing many businesses. The focus for management teams must therefore shift towards resilience, discipline and preparedness.
From an advisory perspective, we are seeing an increased emphasis on several key areas:
- Ensuring data readiness for fundraising, including the preparation of robust and defensible financial information
- Reviewing and optimising corporate and shareholder structures
- Accessing and maximising available grant funding and innovation support
- Supporting effective engagement and negotiation with lenders and other funding providers
- Maximising the benefit of R&D tax reliefs and related incentives
- Addressing the recognition of complex or non-linear revenue streams
- Ensuring appropriate treatment and valuation of intellectual property and other intangible assets
- Structuring strategic partnerships, joint ventures and major commercial agreements
- Developing scalable and sustainable growth strategies
- Undertaking rigorous financial and commercial due diligence
These considerations are not limited to early-stage businesses. More established technology companies are equally required to demonstrate agility – whether through refining their operating models, reassessing capital allocation, or, where necessary, pivoting strategically.
The UK remains exceptionally well positioned as a technology hub. Its combination of world-class academic institutions, deep talent pool and proven track record in scaling and exiting businesses continues to attract both domestic and international investment. Established clusters in London, Cambridge, Bristol, Manchester and Cardiff provide strong foundations for continued innovation.
However, the operating environment is evolving. Growth at any cost is no longer a viable strategy. Instead, those businesses that succeed are likely to be those that combine innovation with financial discipline, strong governance and the ability to adapt quickly to changing market conditions.
The government’s £2.5bn investment underlines the long-term opportunity. The more immediate priority for UK technology businesses is ensuring they are structured, funded and advised in a way that allows them not only to withstand current pressures, but to capitalise on that opportunity when conditions improve.
CVA is no sure escape from business rates
A recent English High Court decision has delivered a pointed reminder that Company Voluntary Arrangements (CVAs), while flexible restructuring tools, do not provide a complete escape from ongoing property liabilities. As highlighted in analysis by law firm Taylor Wessing, the ruling in Mayor and Commonalty and Citizens of the City of London v Robinson Webster (Holdings) Ltd underscores the limits of CVAs in altering proprietary rights—particularly in the context of business rates.
The case arose from the restructuring of Robinson Webster (Holdings) Ltd, the operator of the Jigsaw fashion brand. As part of its 2020 CVA, the company sought to rationalise its lease portfolio by exiting certain loss-making stores, including a retail unit in the City of London. The tenant vacated the premises, returned the keys, and proposed surrender of the lease. However, the landlord declined to accept that surrender, leaving the lease technically in place while the property remained empty for several years.
The central issue was whether the tenant remained liable for business rates during this period of non-occupation. At first instance, the court accepted the argument that the company no longer had a practical ability to occupy the premises and therefore should not be treated as the “owner” for rating purposes. On appeal, however, that conclusion was reversed.
In doing so, the court reaffirmed a strict interpretation of “ownership” under the Local Government Finance Act 1988. The key determinant is entitlement to possession—not actual use or practical control. Because the lease had not been surrendered and continued to subsist, the tenant retained legal possession and was therefore liable for business rates, notwithstanding its attempts to exit the property through the CVA.
As Taylor Wessing observes, the judgment makes clear that a CVA cannot override a landlord’s proprietary rights, including the right to refuse a surrender. Nor can it unilaterally shift statutory liabilities such as business rates onto the landlord. Simply handing back the keys or ceasing occupation is insufficient to transfer liability where the legal estate remains unchanged.
The decision also clarifies the limited scope of the “purposive” interpretation of ownership developed in earlier case law. That approach, which allows courts to look beyond formal legal entitlement in certain circumstances, was held to apply narrowly—primarily in cases involving artificial arrangements designed to avoid rates liability. It could not be invoked merely because a tenant had lost commercial use of the premises as part of a restructuring.
For practitioners, the implications are significant. CVAs remain a powerful mechanism for compromising unsecured creditor claims and reshaping lease obligations, but they cannot be relied upon to extinguish liabilities which arise from continuing proprietary interests. Where landlords decline to accept surrender, tenants may find themselves exposed to ongoing rates liabilities even in respect of vacant and unusable properties.
This has practical consequences for restructuring strategy. Businesses considering a CVA must carefully assess the risk of residual property costs, particularly in large retail portfolios where empty units can quickly generate substantial liabilities. Engagement with landlords—whether through negotiated surrenders or alternative arrangements—remains critical.
More broadly, the ruling reflects a judicial reluctance to allow insolvency processes to disturb established property law principles absent clear statutory authority. Parliament has chosen not to extend business rates relief to companies in CVAs (unlike those in administration or liquidation), reinforcing the policy distinction between these regimes.
In an environment where CVAs continue to play a prominent role in retail and real estate restructurings, the message is clear: they are a tool for compromise, not a mechanism for avoiding the legal consequences of continuing property ownership.
Chocolatier’s meltdown reflects fragile food sector
The UK food sector continues to navigate a period of acute financial stress, with rising costs, supply chain pressures, and narrow retail margins creating a precarious environment for manufacturers and suppliers alike. The recent retreat by Creditors Voluntary Liquidation (CVL) of chocolate maker Icon Foods, a supplier to major supermarket groups including Aldi, Tesco and Asda, underscores just how vulnerable even well-established suppliers with national distribution networks are to cash flow disruption and input price hikes.
The present environment leaves suppliers with limited flexibility to absorb shocks or invest in growth. For many mid-sized operators, liquidity can quickly become a critical issue, especially where extended payment terms and fixed cost commitments coincide with volatile commodity prices. Food is the country’s largest employer, supporting millions of workers across manufacturing, processing, distribution, and retail. Distress at a mid-tier supplier such as Icon not only threatens continuity of supply but also has broader employment and economic ramifications, particularly in regions where production facilities are major local employers.
Recent forecasts suggest that food price inflation, while moderating from the extreme peaks seen post-pandemic, will remain above historical averages through 2026. The Food and Drink Federation anticipates food price inflation averaging around 4.4% over the year, gradually easing to roughly 3.1% by year-end. Other forecasts suggest it could hover near 3.8%, highlighting the persistent cost squeeze experienced by manufacturers and suppliers along the chain.
Icon reinforces a key lesson: scale and retail reach do not immunise businesses from insolvency risk. It also highlights increasing pressure on supermarkets. As suppliers to multiples struggle or fail, retailers face potential disruption to product availability, higher wholesale costs, and reputational risks from stock shortages. In response, many are diversifying their supply chains, tightening contingency planning, and seeking closer engagement with financially vulnerable suppliers.
For businesses in the sector, the key takeaway is clear: proactive cash flow management, scenario planning, and early engagement with both retail partners and financial advisers are more critical than ever. Companies must model the impact of continuing input cost inflation, assess the resilience of their financial structures, and explore strategic options before liquidity pressures become acute.
As ever, the Buchler Phillips approach to business challenges is ‘workout, not bail out’. Don’t hesitate to get in touch for an exploratory chat if your business needs help. Addressing the cracks now will, in many cases, avoid the need to start again.
Our helplines below are open for free initial consultations.
Jo Milner 07990 816904
David Buchler 07836 777748
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About Buchler Phillips
Buchler Phillips is an independent, UK based corporate recovery and restructuring firm, with an impeccable Mayfair heritage dating back to the 1930s.
Led by David Buchler, former Europe and Africa chairman of global consultancy Kroll Inc, our senior team is equally comfortable advising large corporations, Small & Medium Enterprises (SMEs) or individuals. In addition to decades of experience, each of our Partners brings to any given assignment unique independent insight, free from conflicts of interest, that is often sought but rarely found by clients or co-advisors.
The firm is sector-agnostic, but has particularly strong credentials in property; financial services; professional services; leisure and hospitality; retail and consumer; UK sports; media and entertainment; transport and logistics; manufacturing and engineering; technology and telecoms.
Our activities fall broadly, though by no means exclusively, into financial restructuring, including fraud and forensic investigations; operational restructuring and turnaround; expert witness services and recovery solutions for corporates and individuals.
This newsletter is published for the purposes of general information only and does not constitute advice. Any action taken by readers upon the information above is entirely at their own risk.