The position on instruction
The most significant structural change to working patterns since the post-war shift of population out of city centres has been the working-from-home revolution that crystallised during COVID-19 and has substantially persisted. The implications for the businesses that depend on physical concentration of office workers — lunchtime hospitality in business districts, suburban retail dependent on commuting patterns, transport and logistics serving office demand — have been profound. A substantial proportion of insolvency appointments handled by IQ Insolvency in 2024 and 2025 have involved businesses whose underlying problem is that their customer base no longer attends in the way that the business model assumed.
This case study draws on four appointments that share the underlying pattern: a viable pre-pandemic business that found, post-pandemic, that the customer base had structurally changed in a way that the business model could not accommodate.
- ›A Lebanese restaurant in a Central London office district. Pre-pandemic turnover of c.£400,000 annually, primarily from lunchtime trade serving the local office population. Eight to nine staff at peak. Profitable.
- ›A parcel and delivery business in the South West, founded in 2018. Grew through the pandemic e-commerce surge to a steady state with one full-time driver. Post-pandemic, fuel inflation, vehicle maintenance and a structural softening of e-commerce delivery demand compressed margins below sustainability.
- ›A rural newsagent that also operated a small cafe within the premises. The directors took on the business at the outset of lockdown, invested substantially in fit-out, and were ineligible for established-business grants. COVID-era adoption of digital alternatives permanently changed local purchase habits for newspapers and lottery.
- ›A logistics and IT services business that pivoted into air-cargo handling during the pandemic surge. The pivot was successful initially but did not survive post-pandemic normalisation of supply chain volumes and the subsequent rise in international shipping costs.
The analysis
The analytical challenge in each case was the same: was the structural change in customer behaviour temporary or permanent? A temporary change might justify a CVA that bridged the business through to a return to pre-pandemic trading patterns. A permanent change makes a CVA inappropriate because no realistic contribution schedule can be funded from a customer base that has not returned.
Two pieces of evidence drove the analytical conclusion. First, the trajectory of customer behaviour over 2022, 2023 and 2024. Where customer patterns had stabilised at the new (lower) level and showed no upward trajectory over the eighteen months following the principal pandemic restrictions, the change was treated as permanent. Where customer patterns had shown some recovery, more careful analysis of the underlying drivers was undertaken. Second, the wider sector context — hospitality industry data, BID footfall data, commercial property data on office occupancy, and similar wider indicators. In each of the four cases, the wider sector evidence confirmed that the customer behaviour change was structural, not transitory.
Having concluded that the customer change was structural, the question was whether the business could be restructured around the new reality. For the Lebanese restaurant, lunchtime trade had been the principal driver of profitability; evening trade in the office district was thin (the location was not residential), and a pivot to delivery-only would have required cost investment the business could not fund. For the parcel delivery business, the cost base was largely fixed (vehicle, insurance, fuel) and could not be substantially reduced without compromising operational capacity. For the rural newsagent-cafe, closure of the newsagent side and a pivot to pure cafe operation would have required investment in premises modification, marketing and a different customer proposition — none of which the business could fund. For the air-cargo business, the trading model depended on supply chain volumes that had returned to pre-pandemic levels, meaning the rationale for the business's existence had largely evaporated.
The strategy adopted
In each of the four cases, the strategy was Creditors Voluntary Liquidation. The reasoning was substantively the same: the underlying business could not generate sufficient cash flow to support continuing trade in any reasonable restructured form, and therefore neither CVA nor administration would deliver a meaningfully better outcome than orderly closure.
The detailed procedural focus differed for each case. The Lebanese restaurant had employees whose statutory entitlements needed to be supported through the Redundancy Payments Service; the procedural focus included careful handling of the employee position. The parcel delivery business had a vehicle as a principal asset; the procedural focus included asset valuation and realisation. The newsagent-cafe had a lease that needed to be surrendered or disclaimed; the procedural focus included landlord engagement. The air-cargo business had ongoing client contracts that needed to be terminated in an orderly way to avoid wrongful trading exposure for the director.
In each case, the SIP 6 narrative documented the underlying structural change in customer behaviour and the rationale for treating the change as permanent rather than transitory. This positioning matters for the conduct framework — directors who close a business in response to documented structural change in their market are in a materially different conduct position from directors who close a business because of trading mistakes or personal misconduct.
Execution
Each appointment was taken via the standard CVL procedure — statement of affairs, s.100 IA 1986 decision procedure, creditor notifications, liquidator appointment. The matters were procedurally straightforward. Each completed within ten months of appointment.
Asset realisations across the four cases varied. The parcel delivery vehicle was sold at auction at a price modestly above book value. The Lebanese restaurant's kitchen equipment was sold to a successor restaurant operating from different premises. The newsagent-cafe's lease was surrendered to the landlord at no realisable value, with the remaining stock sold at clearance values. The air-cargo business had limited tangible assets; the client contracts had no transferable value once the business had ceased.
The outcome
Each liquidation completed within nine to twelve months of appointment. Dividend distributions to unsecured creditors varied from minimal to modest, reflecting the underlying asset position rather than any procedural shortcoming. None of the four directors faced CDDA referrals; the conduct findings recorded that each had ceased trading at the right time, had engaged professional advice promptly, and had cooperated fully with the appointment.
The restaurateur opened a new venue in a residential area suited to evening and weekend trade. The parcel delivery operator moved into employment with a larger logistics employer. The newsagent-cafe directors took the lessons from the failed venture into a different commercial role. The air-cargo director returned to the IT services sector that the company had originally been founded to serve.
The wider point that these cases illustrate is significant. Structural change in working patterns is not a temporary phenomenon. Businesses whose model depends on pre-pandemic customer behaviour need to assess honestly whether their customer base has returned, whether it is likely to return, and whether the business can be restructured around a permanently changed customer reality. Where the assessment indicates that the change is permanent and that restructuring is not feasible, orderly closure through CVL is the right procedural answer.
Takeaways for directors of WFH and post-COVID affected businesses
- ›Structural change in customer behaviour is not always temporary. Where customer patterns have stabilised at a new level and shown no recovery over eighteen to twenty-four months, the change should be treated as permanent for planning purposes.
- ›The viability test in CVA terms is sensitive to assumptions about future customer behaviour. A business that depends on customer behaviour returning to pre-pandemic patterns will fail in CVA implementation if those patterns do not return. Conservative assumptions at the proposal stage are critical.
- ›Where the business cannot be restructured to operate viably on the new customer reality, orderly closure through CVL is the right procedure. Pursuing CVA or administration where the underlying business cannot be saved produces wasted cost and worse outcomes for creditors and directors.
- ›Sector-wide evidence is highly relevant to conduct findings. Directors who close a business in response to documented structural change in their market are in a materially better conduct position than directors who fail to recognise market change.
- ›Personal positions are typically protected in structural-change closures. The director has not done anything wrong; they have responded appropriately to a market change beyond their control. Conduct outcomes routinely reflect that distinction.