As economies continue to tackle the impacts of the Covid-19 pandemic, PwC’s Global Restructuring Trends report estimates that 40-million people were on furlough across 37 economies in July 2020.

The analysis outlines how governments and businesses have responded to the economic upheaval linked to the Covid-19 pandemic, and the business challenges and public policy responses that are shaping market activity in 37 economies worldwide. The analysis underlines the need for businesses to act now and recover and grow in 2021.

Heather Swanston, global leader: business restructuring services at PwC, comments: “Government intervention has provided a vital lifeline for many businesses, even ones that had previously been strong and well-resourced. Few would doubt that we’re entering a make or break period, with businesses facing hard choices ahead.

“With more than 40-million workers in 37 economies on furlough, businesses need to act now to get themselves on the front foot.

“Businesses need to act now to understand their options to stabilise their business in the short-term, while also helping them gear up for longer term shifts in technology, customer expectations and international trading arrangements.”

Key findings from the report are:

* To date, both insolvency rates and pressure to restructure have generally been held in check by government intervention – including loan guarantees, wage subsidies for workers put on short time or furlough, tax holidays and moratoria on insolvency action.

* During the critical initial months of the crisis (Q2 2020), insolvency rates fell across many markets compared to Q2 2019. In general, insolvencies are expected to increase in Q4 2020 and into 2021, especially for those companies that operate in heavily Covid-19-affected industries that may take much longer to recover, as well as for those that have yet to adapt their operations to the new environment.

* Restructuring activity is set to pick up in the last quarter of 2020 or early 2021 as government support is withdrawn. Restructuring activity (including schemes of arrangement, cost transformation programmes, refinancing and restructuring M&A processes) will help to reduce the number of potential insolvencies and increase the likelihood of companies surviving.

* Undeployed capital in private equity ($2670,8-billionn) and debt funds are at an all-time high, significantly above the levels available during the Global Financial Crisis, creating a launchpad for a fast acceleration in deals and market recoveries. An increasing number of companies have been able to raise new financing without significantly compromising existing debts, and thereby avoided lengthy restructuring processes.

* There will be opportunities to make the most of rapidly developing restructuring regimes, which provide new tools to work through the issues created by the crisis. These include new legislation implemented or pending in the UK, Netherlands, Singapore, Middle East and the Cayman Islands.

For companies to navigate the complex challenges their organisation may face and maintain control, we believe that it’s important to focus on four critical areas: operations, liquidity and cash, financial restructuring and stakeholder management and strategic mechanisms.

Craig Du Plessis, head of capital advisory and restructuring services (Africa) at PwC, adds: “As a result of depressed market conditions which have been further exacerbated by Covid-19, South Africa has seen an increase in the number of financial and operational restructurings, business rescue and liquidation filings. This trend is expected to continue into the foreseeable future. Companies therefore need to act now (when there are more options available to them) to ensure that value is at least initially preserved and thereafter created for its stakeholders.”