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A report from the National Audit Office (NAO), looking into how well the Treasury and HM Revenue & Customs managed risks involved in implementing the furlough scheme – and its sister scheme to support the self-employed – makes for depressing reading.
Even at a time when the public is becoming inured to the vast sums being sprayed around and borrowed by the government, in its response to the COVID-19 pandemic, the figures have the capacity to shock.

The NAO, the public spending watchdog, says that up to £3.9bn has either been paid out in error or fraudulently claimed under the furlough scheme.
Even in a best-case scenario, an estimated £2bn has been lost.

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Some furloughed workers are still working

Most worrying of all is its conclusion is that there has been “organised criminal activity, including the stealing of taxpayer identities and coercion of taxpayers to make fraudulent claims”.

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Unscrupulous employers making claims for employees that they then insisted continue to work for them is one obvious source of fraud.

But what is particularly depressing is that HMRC officials told the NAO that they were “almost certain” that more than half of fraudulent claims had come from organised crime gangs pretending to be legitimate businesses.

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Nor does the NAO hold out much hope that much of this money is going to be clawed back on behalf of taxpayers.
As Meg Hillier, chair of the public accounts committee of MPs, put it: “HMRC has paid out billions of pounds to fraudsters. Most of this is likely to be gone for good.”
The scale of the failure to stop fraud is also spelled out with the NAO’s revelation that, to date, HMRC has blocked only £10m of claims under the furlough scheme. Money appears to have been handed out with gay abandon.
Yet HMRC and the Treasury also have a case for their defence.
Gareth Davies, the head of the NAO, pointed out that establishing the furlough scheme and the related Self-Employed Income Support Scheme (SEISS) had been a huge challenge.
He told Sky News: “HMRC set up this scheme from scratch within a four week period right at the peak of the pandemic with everyone working remotely.
“This was a very significant achievement and it resulted more than 12 million people receiving income support through the lockdown period and payments were made very quickly – and that is an important part of the context.”
Mr Davies said there was only a limited amount of time for checks before claims from employers for the furlough scheme were approved and paid and that had meant that there were risks.

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Chancellor sets out three extra support measures

He added: “Everyone knew from the outset that that was a high level of risk that a tax and payment system like this would normally run.”
Mr Davies said it was still “early days” in terms of establishing levels of fraud and error and said it was possible that the final figure could turn out to be “quite different”.
He said HMRC was “well practised” in dealing with allegations of fraudulent behaviour from whistle-blowers and said he was confident that the agency was dealing with tip-offs.
A hotline set up by HMRC for people to report fraudulent claims under the schemes has received more than 10,000 calls and Mr Davies said he was satisfied these calls were being followed up – although it is also worth noting that, during the early days of the furlough scheme, the telephone hotline was not available because home-working restrictions meant staff could not take calls in a secure environment.
The concern must be, though, that HMRC has sufficient resources to tackle fraud.
The NAO report reveals that HMRC is redeploying 500 full-time staff to work on ‘post-payment’ compliance work – raising the prospect that some fraudsters will subsequently have money clawed back from them. This is expected to get back an additional £275m based on current investigations into 10,000 of the highest risk claims.

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Dodds: ‘We’ve got to get ahead of the crisis’

Even in this approach, the NAO notes, there are risks. It observes redeploying staff will cost up to £200m in lost tax revenues because these workers will be taken away from doing other tax compliance work. It says it would take too long – 18 months – to recruit people and train them appropriately.
On a brighter note, the NAO appears to have been much more successful at stopping fraud under the SEISS.
While payments made in error or due to fraud under the furlough scheme are currently estimated at between £2-£3.9bn, they are currently put at just £130-£270m under the SEISS. That partly reflects the smaller scale of the SEISS – but also the fact that, unlike with the furlough scheme, applicants could not put in a claim via an agent but had to do so under their own name.
HMRC reported that it also “monitored activity and prevented some large-scale attempts to attack the system”, for example, blocking around 87,000 claims, worth £242m, over the course of a single weekend in May due to suspicious activity.
It would be very easy to get depressed about this report.
However, it is worth recalling the speed with which the furlough scheme and the SEISS were set up, which would have been impressive even by the standards of the private sector.

Aviation and retail worst hit in jobs crisis

By the standards of the public sector, where decisions are often made, signed off and then implemented at a glacial pace, it was nothing short of astounding.
It is also worth recalling the intense pressure under which Rishi Sunak, the chancellor, came under to support people whose jobs and livelihoods were threatened by the lockdown. Most people were generally satisfied with the Treasury’s response and the furlough scheme also won praise, at the time, when compared with alternatives elsewhere.
Moreover, even as the scheme was being set up, it was acknowledged that some money would be paid out in fraud or error.
Some may judge that that leakage of money, however shocking, is the lesser of two evils when the alternative would have been literally millions of people running out of cash.
The most important thing, looking ahead, is that HMRC is given all the support – both staffing and financial – that it needs to identify fraudsters and to haul them before the courts.

Caffe Nero is considering an insolvency mechanism to restructure its financial liabilities as the coronavirus crisis continues to inflict pain on high street hospitality businesses.
Sky News has learnt that the chain, which is one of Britain’s biggest coffee shop operators, is examining a company voluntary arrangement (CVA) as an option to reduce its rent bill and exit loss-making outlets.

The privately owned group has yet to make a final decision about a CVA, although sources say one is expected in the coming weeks.

Aviation and retail worst hit in jobs crisis

Further details about the consequences of a CVA, including numbers of job losses or shop closures, were unclear on Friday.
Like rivals such as Pret A Manger, Caffe Nero has been heavily impacted by the reduced footfall in city centres as millions of Britons continue to work from home.

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Insiders say Caffe Nero, which is working with KPMG on its options, is expected to seek steep rent cuts from landlords as part of any restructuring deal.

Britain’s hospitality industry was offered some respite from the pandemic this week when Rishi Sunak, the chancellor, announced a more generous state subsidy package for workers’ wages.

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Sector chiefs warned, though, that the relief was likely to be only partial and temporary, with permanent changes to consumer behaviour still expected to herald significant redundancies.

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Chancellor sets out three extra support measures

Caffe Nero operates 660 stores across the UK, more than 90% of which have reopened since the original UK-wide lockdown ended in June.
The group, which is owned by Gerry Ford, is said to have been performing strongly prior to the COVID-19 crisis.
It employs about 5,000 people and says it serves 135 million customers annually.
A Caffe Nero spokesman declined to comment specifically on the potential for it to launch a CVA.
Last month, it said: “It has been a difficult period since lockdown measures were introduced by the government and we’re working incredibly hard to navigate our way forward.
“As part of this, we are working closely with advisors to help review our options and assist with our ongoing negotiations with landlords.”

Barclays has warned it is evaluating cost-cutting measures after raising provisions for bad loans during the coronavirus crisis to date to £4.3bn.
The bank reported that third quarter group profit before tax came in at £1.1bn after booking charges of £608m in the July to September period.

It had previously revealed provisions of £3.7bn covering the first half of the year as the COVID-19 crisis rocked the global economy – also forcing the bank and its UK rivals to the front line in the provision of emergency government-backed loans to business customers.

Image: Jes Staley is the chief executive of Barclays
Barclays said that it had also provided over 640,000 payment holidays globally and foregone “some £100m” in the form of waived overdraft interest and banking charges for UK customers and business banking clients.
“We have now delivered some £25bn through the government support measures to UK businesses”, the bank added.

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But its statement warned that it was evaluating actions to reduce structural costs.

The bank said no decisions had been taken as the pandemic continues to cloud the path ahead, with record low interest rates hitting margins.

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Chief executive Jes Staley told financial analysts that the prospect of the Bank of England introducing negative interest rates in any persistent economic downturn would be “very tough” for banks – putting pressure on profitability.
However he said that such a course could be of benefit, if it boosted spending in the economy.
He also failed to rule out bonuses for the full year despite dividends to shareholders being suspended.
Barclays said that despite the weak rate environment, its consumer-facing businesses returned to profit in the period.
Barclays UK delivered profit before tax of £196m. The bank credited lower impairment charges and a limited recovery in economic activity.
The consumer, cards and payments division was in the black to the tune of £165m, Barclays said.
Its investment bank continued to be the darling for earnings, with the markets division delivering a 29% leap in revenue to £1.7bn.

Image: The bank’s main UK competitors, HSBC, RBS and Lloyds, reveal their third quarter results next week
Shares rose 4% at the open and climbed throughout the session with rival bank shares also benefiting on the better than expected performance.
Mr Staley told investors: “In this historically challenging year for our customers and clients we have continued to provide huge support to help people through the social and economic impact of the COVID-19 pandemic.
“This remains a priority, alongside maintaining the financial integrity of the firm and keeping our colleagues safe.”
Mr Staley has been a cheerleader for the investment bank under pressure from some investors for a renewed shrinking of the more risky division.
Neil Wilson, chief market analyst at Markets.com, said of the Barclays results: “A strong performance at the corporate and investment bank lifted Barclays to a significant Q3 pre-tax beat.
“Profits before tax of £1.15bn was about twice what was expected by the market.
“Much like its bigger Wall Street cousins the investment banking division is offsetting a weaker performance in the consumer bank. Sticking with the investment bank was the best thing Barclays could have done.”
Barclays is the first of the major UK banks to report on their progress during the summer months.
Next week sees Lloyds, HSBC and RBS reveal their respective updates.

Official figures show the biggest quarterly leap on record for retail sales, as the sector battles back from the coronavirus lockdown amid renewed restrictions.
The Office for National Statistics (ONS) reported a 17.4% jump in volumes in the third quarter of the year covering July to September.

The wider figures were much stronger than analysts had expected given continued consumer caution in the tough COVID-19 economy that has led to a surge in unemployment and forced the chancellor to improve his financial aid to businesses and workers.

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Chancellor sets out three extra support measures

The data showed sales excluding fuel purchases rose by 1.6% in September from August, leaving them 6.4% higher when compared to the same month in 2019.
There has been separate evidence that shoppers may have brought forward Christmas spending because of uncertainty over pandemic restrictions in the months to come.

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The ONS said supermarkets led the charge as people were eating out less – with non-food sales just 1.7% above their pre-pandemic level in February. Clothing sales were almost 13% down in the same measure.

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The proportion of online sales in the total mix stood at almost 28% in September compared to 20% in February.
The news is largely welcome for a sector that has been among those to feel the worst of the pain in the crisis to date, according to a Sky News jobs tracker.

Aviation and retail worst hit in jobs crisis

Industry figures, however, suggest that discounting in many sectors – to lure shoppers to spend – will hit bottom lines.
ONS deputy national statistician for economic statistics, Jonathan Athow, said of the current trends: “Retail sales increased again in September, the fifth consecutive month of growth since the record falls seen at the start of the pandemic.
“Food stores and online retailers have fared particularly well in recent months, and most other store types have now recovered to pre-pandemic levels too after being subject to temporary closures during restrictions in the spring.
“Spending on home improvement and gardening items in particular have boosted sales.
“Clothing store sales have been slower to recover and fuel sales remain subdued as people continue to work from home and have reduced the amount they travel.”

Restaurant chain KFC has announced plans to create a further 5,400 jobs following a surge in demand for takeaway meals during the coronavirus crisis.
The fast food chain said the new jobs will be created across its 965 restaurants in the UK and Ireland and will come in addition to the 4,300 roles created since March.

The new recruitment programme is aimed at 16 to 24-year-olds as KFC said it will utilise the government’s £2bn “Kickstart Scheme” to subsidise its hiring.
Under the government programme, which was launched in September, employers will receive funding to pay the national minimum wage to get young people back into work.
The scheme is expected to run until December 2021 but KFC said all its new hires will be on permanent basis in full time or part time roles offering a minimum of 25 hours per week. It added the company does not offer zero-hour contracts.

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Entrepreneur James Caan: Kickstart must help older workers and SMEs

Kentucky Fried Chicken, which is the world’s second largest fast food chain, said it is on track to hire 10,000 people by the end of the year reflecting its positive outlook for the sector.

It builds on the recent trend of services with lockdown immunity, such as supermarkets and delivery firms, taking people on at a time when the wider economy is gearing up for a jobs crisis as the government’s furlough scheme winds down.

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Most recently Domino’s Pizza said it was hiring an additional 5,000 staff after it reported a 5% leap in sales over the first half of its financial year covering the full lockdown period.
Its fortunes are in stark contrast to those of dine-in rivals Pizza Express and Pizza Hut Restaurants which are cutting outlets as a result of the lockdown damage and collectively placing more than 1,500 jobs at risk.
Analysis by Sky News shows hospitality to be the third worst-hit part of the economy despite the lift from the government’s Eat Out to Help Out scheme.

Where jobs have been lost in the UK economy
Where jobs have been lost in the UK economy

Paula MacKenzie, General Manager at KFC UK & Ireland said: “There’s no denying it’s been a tough year for the hospitality sector, and we’re already seeing the substantial impact of that across our high streets and city centres.”
Ms MacKenzie added: “The vast majority of our restaurants are run by franchisees, which are often smaller family owned businesses that have faced the unique set of challenges of this year, including the complete closure of restaurants in March – we’re proud to have been able to work together to reopen responsibly and in turn ensure the stability of our restaurants and provide new job openings into the industry at this time.”

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How much could Chancellor’s Winter Economic Plan cost?

KFC says around 95% of its restaurants are run by 37 franchise partners, who range from small family owned businesses to bigger franchise companies that run multiple outlets.
The UK faces not only a COVID-19-linked jobs crisis but the challenge of curbing the numbers of young people deemed to be ‘not in education, employment or training’.
In July, almost 538,000 young people claimed Universal Credit – more than double the total in March.
Paul Scully MP, Minister for Small Business, Department for Business, Energy and Industrial Strategy said: “There is no denying that this is a tough time for British workers, so we welcome this major investment in jobs, training and skills, especially for younger workers and those who may not have formal qualifications.
“It is great that iconic brands like KFC are continuing to grow and invest in the UK during this challenging time. We continue to support businesses of all shapes and sizes through this crisis with measures like the Kickstart scheme.”

The UK and Japan have signed a free trade agreement at a ceremony in Tokyo, hours before negotiations on a post-Brexit deal with the European Union are due to resume.
The UK-Japan Comprehensive Economic Partnership Agreement (CEPA), which was agreed in principle last month, marks Britain’s first deal with a major economy since Brexit.

The government claims the agreement will boost trade with Japan by £15.2bn over the next 15 years – and UK businesses will enjoy tariff-free trade on 99% of exports to the country.

Image: International Trade Secretary Liz Truss talks with Japan’s foreign minister Toshimitsu Motegi in June. Pic: Andrew Parsons/10 Downing Street
International Trade Secretary Liz Truss had struck the deal with Japan’s foreign minister Toshimitsu Motegi on a video call on 11 September.
After the ceremony, Ms Truss said: “How fitting it is to be in the land of the rising sun to welcome in the dawn of a new era of free trade.” She added it would “pave the way” towards UK membership of the wider Trans-Pacific Partnership.

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Ms Truss had earlier hailed the importance of the agreement.

“At its heart, this deal is about creating opportunity and prosperity for all parts of our United Kingdom and driving the economic growth we need to overcome the challenges of coronavirus,” she said.

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The government said the deal would support UK car and rail manufacturing jobs, lower tariffs on products like pork, beef and salmon, and British consumers would get access to cheaper, high-quality Japanese goods.
Dame Carolyn Fairbairn, CBI director general, said: “The signing of the UK’s first independent trade agreement is a milestone for our economy and will be welcomed by businesses in many sectors.
“This deal has the potential to support jobs across the country through lifting British farming exports and supporting our manufacturing and services sectors. Consumers will also benefit through greater choice.”

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‘Every day counts’ as Brexit talks resume

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Government analysis found that a deal with Japan would boost the UK’s GDP by around 0.07% over 15 years and increase UK workers’ wages by £800m in the long run.
It is due to publish a full report on the agreement, including any significant differences or enhancements.
Brexit talks between Britain and the European Union are set to resume after stalling last week when Downing Street insisted there was no point in resuming discussions unless there was a change in stance from the EU.
The EU’s chief negotiator Michel Barnier has welcomed the reopening of talks and told reporters in London that he wanted to make “every day count”.
Allie Renison, senior policy advisor at the Institute of Directors, said: “This standalone trade deal [with Japan] could be the cherry on top if the UK manages to land an EU deal as we exit the transition period.”

West Midlands mayor Andy Street was urged to stop criticising the government by fellow Conservatives when he lobbied the chancellor to provide more support to struggling businesses.
Mr Street told Sky News members of his party asked him to keep quiet despite his concerns that Tier 2 COVID-19 restrictions would endanger businesses, and said the government was “playing a bit of catch-up”.

“I will be honest with you and say that there were some in the Conservative Party who said you shouldn’t be criticising your own government,” he said.
“But my driving force is really very clear. This is what businesses in this region needed, and I was determined to fight for them and I’ve done that, hopefully with cross-party support from the region, and most importantly the support of the sector in the region, and it’s that unity that I think has seen us through.”

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Rishi Sunak has announced a new support package for businesses affected by Tier 2 restrictions

Mr Street was one of several regional mayors to raise concerns about the chilling impact that Tier 2 would have on pubs, bars and restaurants.

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Despite being able to remain open, the restriction on households mixing inside hospitality venues has depressed demand to the point that many venues said they would prefer to be closed under Tier 3, where they were eligible for financial support.

Almost two weeks after the tier system was introduced, Chancellor Rishi Sunak has announced enhanced support for companies in all sectors.

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The revised Job Support Scheme, which will replace furlough next month, has become more generous, with employees required to work just 20% of hours and receiving two-thirds of their wages, with employers paying just 5%.
The Job Support Scheme remains less generous than furlough but the chancellor will hope it will hold off a predicted wave of unemployment.

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The majority of British people support a two-week

Critics say the government has only acted when Tier 2 restrictions reached the West Midlands and London, contrasting the action with the protracted and fractious negotiations with Labour mayor of Greater Manchester Andy Burnham over support for entering Tier 3.
Mr Street said events had forced the government’s hand, and suggested they had not foreseen the dramatic impact of Tier 2 on consumer demand.

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Chancellor has ‘listened to the hospitality industry’

“I think this is all about how fast this situation is moving,” he said.
“When the chancellor stood up just a very few weeks ago, and talked about his winter economy plan, no one expected the level of the virus to be as it is, the Tier 2 restrictions to be as they are, so I think what this is about, is in essence playing a bit of catch up, but at least they responded quickly, and they’ve listened to the argument being put forward.
“They were very much focused on, if we have to close then they had an answer there, but they hadn’t thought two weeks ago about this, let’s call it middle tier, some of the hospitality business said it’s the worst of all worlds, and I really understand that.
“That’s why we were quick in arguing the case and to be fair, it’s been a matter of days it’s taken them to respond.
“We have of course also said, if the situation hasn’t improved by after Christmas we’ll need further extensions, we need to think about the VAT extension. We need to still think about business rates, but as a step today, I think it’s very, very significant and certainly welcome.”

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Burnham: No 10 ‘walked away’ from Tier 3 talks

Cases continue to rise in the West Midlands but the mayor said it was not “inevitable” that the region comes under Tier 3 if people follow current restrictions.
“I don’t think it’s inevitable. No, that’s too tough, but we’ve got to be honest, it could happen,” he said.
“To be really clear there are no discussions yet about formerly moving any parts of the West Midlands into Tier 3, but the numbers are still rising here steadily, slower than many other parts of the country, but if we don’t turn that rise, then we will end up with a discussion about Tier 3 so it’s in everybody’s interest across the West Midlands to follow the rules and make sure we stick where we are.”

The leaders of Greater Manchester and Merseyside have accused the government of only providing extra support to coronavirus-hit businesses once restrictions were imposed on parts of southern England.
Chancellor Rishi Sunak on Thursday broadened support for firms and workers affected by localised COVID-19 measures with billions of pounds of extra help.

This included changes to the Job Support Scheme, which replaces the furlough scheme from next month, to allow employees in open businesses to work only one day a week to be eligible for support, with employer contributions for unworked hours falling to 5%.
Grants for the self-employed will be doubled to 40% of pre-crisis earnings, increasing the maximum grant from £1,875 to £3,750.
And businesses affected by Tier 2 restrictions will be able to claim cash grants worth up to £2,100 a month from local authorities, to be backdated from the introduction of those measures.

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Image: Measures under Tiers 1, 2 and 3 of England’s lockdown system
The announcement came just two days after the government walked out of talks with Greater Manchester’s leaders on a financial support package to accompany the region being placed into Tier 3 restrictions.

Ministers were accused of failing to grant an extra £5m that would have secured the agreement of local leaders and averted Prime Minister Boris Johnson from having to unilaterally impose fresh measures.

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The chancellor’s announcement of further economic support, for which firms will be able to backdate claims from August, riled politicians in the north of England.
They claimed Mr Sunak had only acted following the imposition of Tier 2 restrictions on London last week, even though other parts of England – including Greater Manchester – had been living under similar measures for months.
Andy Burnham, the mayor of Greater Manchester who has recently been engaged in a bitter political row with ministers, posted on Twitter: “Honestly, can barely believe what I’m reading here.
“Why on earth was this not put on the table on Tuesday to reach an agreement with us?
“I said directly to the PM that a deal was there to be done if it took into account the effects on GM businesses of three months in Tier 2.”

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Chancellor sets out three extra support measures

Sir Richard Leese, the leader of Manchester City Council, tweeted: “Looks like Rishi Sunak is agreeing with Greater Manchester Leaders. Pity he couldn’t have done it two weeks ago.”
And Steve Rotherham, the mayor of the Liverpool City Region, said: “It’s a shame that it took London coming under further measures for the Chancellor to take action to support jobs and businesses.”
London, most of Essex and Elmbridge in Surrey were last week put into Tier 2 measures, which means people must not socialise with other households indoors, including in pubs and restaurants.
Similar measures had been in place in large parts of the North West since the summer.

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Speaking later at a Downing Street news conference, Mr Sunak said the Job Support Scheme was designed over the summer “with a view to the economy being open and restrictions being lifted”.
“Obviously the last few weeks, that has not been as those businesses had expected,” he said.
“Those restrictions were coming back, they were having a cumulative effect on the ground, particularly in Tier 2 areas, particularly in hospitality.
“That’s been the cumulative weight of the changes and the impact, more broadly, on consumer confidence that we’ve seen.
“And that’s why we’ve been in discussions to try and see what changes we can make that would do what we want to do – which is to try and protect jobs and employment at this difficult time.”
Mr Johnson said: “The negotiations between regional leaders, between metro mayors, was all about fairness – that’s what that discussion was about, it was about making sure everybody got the same package.
“What we’re trying to do now is address a national issue, which is that – obviously since the virus started to come up again – there’s been much more concern, particularly amongst the business community, about people’s ability to protect jobs and livelihoods because of the effects of the virus.”
The latest row over the government’s new three-tier approach to localised lockdown rules came as ministers were warned by Dan Jarvis, the Sheffield City Region’s mayor, that coronavirus had put northern England “on course for levelling down, not up” – in contrast to the prime minister’s general election pledge.

KPMG has become the second major auditor to begin exploring a sale of its UK restructuring arm in as many months, as the big four accountants prepare for unprecedented reform of the profession.
Sky News can reveal that KPMG is reviewing options for its restructuring division, which comprises dozens of partners, even as the coronavirus pandemic’s impact on the economy paves the way for a significant improvement in its financial performance.

People close to the situation said the review was at an early stage, and could yet lead to a decision to retain the business.
The talks are understood to be being led by executives including Blair Nimmo.
KPMG went through a similar review process several years ago before opting to keep the unit, although industry insiders pointed out that the audit reform agenda meant that pressure over conflicts of interest had now becoming increasingly difficult to manage.

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On Friday, the big four auditors will submit plans to the Financial Reporting Council (FRC) demonstrating how they intend to ‘operationally separate’ their audit and consulting arms during the next four years.

That push has come in the wake of accounting scandals at companies such as BHS and Carillion, which collapsed with the loss of tens of thousands of jobs.

KPMG was Carillion’s auditor prior to its demise, and is likely to face a hefty regulatory fine in the coming months as the Financial Reporting Council concludes its investigation.
The firm’s restructuring arm has handled a number of prominent insolvency processes during the COVID-19 crisis, including the administration of Intu Properties, the shopping centre-owner.
News of its review comes just days after Sky News revealed that hundreds of partners at KPMG UK are braced for reduced payouts as the firm postpones the release of its annual results until it has a clearer view of the UK’s economy prospects.
The firm told roughly 600 partners earlier this year that they could see their 2020 pay packages reduced by around 25%, saying that they “will and should feel a greater impact” – while also warning that the wider workforce should expect to receive “significantly reduced…or no bonuses this year and it would be wise for people to plan for that eventuality”.
During the summer, KPMG abandoned proposals to slash the sums it pays into thousands of employees’ pension pots following the threat of legal action.
The firm said it had launched the pensions consultation in July as “part of a broader range of measures to reduce overall costs in FY21 and to protect jobs in an unpredictable economic environment”.
Bill Michael, KPMG’s UK chairman, has described the pandemic as “an economic disaster”.
KPMG has also sold its pensions advisory business to a private equity-backed buyout, providing a possible template for a transaction involving its restructuring arm, according to insiders.
Last month, Sky News revealed that Deloitte, its rival ‘big four’ firm, had begun talks about the sale of its UK restructuring division.
It remains in discussions with its global network about a potential sale process, although formal talks have yet to get underway.
New rules restricting consulting work for firms’ audit clients have led to frustration across the restructuring market.
KPMG declined to comment.

Sportswear giant Adidas finally looks set to end its unhappy ownership of the Reebok brand.
German news magazine Manager-Magazin, which has a strong track record in reporting corporate developments in the country, reported on Thursday that Adidas aims to complete a sale of Reebok by March next year.

It added that Adidas had written down the book value of Reebok by almost half, to €842m (£760m), as a precursor to a sale.
The publication speculated that VF Corp, the American clothing giant whose brands include The North Face, Timberland and Dickies, could be among interested buyers.
Anta Sports, the Chinese company that has become the world’s third-largest sportswear company through shrewd endorsements such as that of the boxing legend Manny Pacquiao, is another suggested buyer.

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A sale would end an ill-fated venture which began when, in 2006, Adidas paid $3.8bn (£2.9bn) for Reebok in an attempt to build more of a presence in the crucial US home market of its deadly rival Nike.

Image: Chief executive Kasper Rorsted has faced repeated calls from shareholders to sell Reebok since he joined in October 2016
It has not worked out as planned – but the decision to offload Reebok would still suggest a significant change of heart on the part of Adidas.

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The company’s chief executive, Kasper Rorsted, has received repeated calls from shareholders to sell the business since he joined in October 2016 from the consumer goods and chemicals giant Henkel.
At the company’s annual meeting, in May 2017, he explained in detail why Reebok was not for sale.
Mr Rorsted told investors: “We are still convinced of the strategic positioning of the brand and its relevance in the market. Reebok focuses exclusively on fitness consumers. Its goal is to become the best fitness brand in the world. Fitness is an important growth market because more and more people want to be and need to be healthy and fit.
“We also want to be the innovation leader in fitness. Reebok is a pioneer in terms of new fitness activities and development of new technologies and products. So Reebok does have lots of opportunities for the future, and we are confident about this brand’s future, although we do know that we have to do a certain amount of homework, especially as far as the profitability of this brand is concerned and its growth in its home market, the US.”
That appeared to put an end to the matter and, in subsequent interviews, Danish-born Mr Rorsted indicated he expected to complete a turnaround of Reebok during the subsequent four years.
By 2020, he said, he expected Reebok to be achieving margins in line with the parent company.

Image: Model Gigi Hadid was signed as a brand ambassador with a view to boosting the Rebook brand’s popularity with female consumers
Mr Rorsted, a noted turnaround specialist, certainly gave the Reebok brand plenty of support and money.
The website was relaunched and partnerships were established with the likes of Huntsman, the upmarket UK tailor and later with Victoria Beckham, the designer.
The Game of Thrones actor Nathalie Emmanuel, the models Gal Gadot and Gigi Hadid and the singers Cardi B and Ariana Grande were all signed as brand ambassadors with a view to boosting the brand’s popularity with female consumers in particular.
Initially, the strategy, called ‘Muscle Up’, appeared to pay off. After having lost more than €150m in 2016 alone, Reebok returned to profitability in 2018, two years ahead of target.
In 2019, the brand continued to grow, thanks partly to the launch of a loyalty programme aimed at competing more effectively with rival suppliers such as Lululemon and Under Armour.

Then came COVID-19. During the second quarter of the year, as stores were closed around the world, Adidas group sales fell by 35% – but at Reebok, thanks partly to its bigger share of the US market, they were down by 42%.
It seems that, as a result, Mr Rorsted has lost patience with the business. Manager-Magazin reported that, prior to the pandemic, he would have sought at least €2bn for Reebok. Now, it said, he will accept less.
Any buyer of Reebok will be acquiring a business with an illustrious history and which can claim to have invented the trainer.

Image: Reebok shoes displayed at the company’s headquarters in Herzogenaurach, southern Germany
The business was founded in Bolton in 1895 by Joseph William Foster, a cobbler, who was also a keen amateur runner. Frustrated at the footwear available, he improvised by adding spikes to his shoes, quickly attracting interest from other runners.
Within a decade, Foster’s Running Pumps were being sold around the world, with the company going on to supply the entire Great Britain team during the 1924 Olympics that was later made famous by the film Chariots of Fire.
Mr Foster’s grandsons, Joe and Jeff, set up a sister company in 1958, named Reebok after a breed of African gazelle, which eventually absorbed the original business.
The business expanded into the US in 1979 when an entrepreneur called Paul Fireman persuaded the family to give him the US distribution rights.
Within five years, he had bought out the family, going on to float the business on the stock market in 1985.
The company never forgot where it came from, though, as shown by the little Union Jack on its shoes.

Image: University of Bolton Stadium opened in 1997 and was originally named the Reebok Stadium
It went on to sponsor firstly Bolton Wanderers football club and then later, during the club’s glory years when it was owned by the businessman Eddie Davies, its new stadium.
Few dispute that, under Adidas, Reebok lost its way. The German company does not have a good track record with acquisitions – witness the way the ski brand Salomon floundered under its ownership – and Reebok has been eclipsed in key areas by Nike.
That said, it is possible to see how it can grow again, not just because of its strong position in fitness. The brand enjoys an edgy cachet thanks to its prominence in emerging sports like mixed martial arts.
There is a platform for further growth there for those who look closely enough.