Cost Of Insolvencies At The Highest Level In A Decade
Last year, during the 2020 calendar year, The Insolvency Service an agency of The Department for Business, Energy and Industrial Strategy paid out a total of £453.37 million from the National Insurance Fund to former members of staff as a result of their employer entering into either administration, liquidation, a CVA or another form of corporate insolvency according to analysis by the real estate adviser, Altus Group, the highest amount in a decade.
A total of £297.49 million was paid out in redundancy pay whilst £93.32 million was for money that would have been earned working a notice period. £28.41 million went on unpaid holiday pay and £34.15 million on outstanding payments for wages, overtime and commission owed according to data released to Altus Group under the Freedom of Information Act.
The amount paid was up by 31% on the previous year, £107.26 million higher than the £346.11 million paid during 2019. This was the highest amount paid out of the National Insurance Fund at any time during the last decade driven by the high street crisis taking total payments from the fund to £3.02 billion during the last 10 years.
Despite this, the actual number of underlying company insolvencies during 2020 fell by 27% with £280 billion of Government support keeping the ‘pilot light’ on for many struggling firms.
A host of well-known retailers went into administration during 2020 affecting 109,407 jobs with 47% of those employees losing their jobs compared with around one third during the previous recession in 2008 demonstrating that retailers going bust are now much larger and the effects on staff more pronounced according to the Centre for Retail Research.
The coronavirus pandemic has seen shoppers stay at home involving frequent lockdowns of ‘non-essential’ stores driving shoppers online. ‘Social distancing’ and other requirements of trading during the pandemic increased retail costs and made it difficult to attract customers. High streets also become less desirable during 2020 with large parts of the hospitality sector closed for long periods.
The Ministry of Housing, Communities and Local Government say that they expect Council income from business rates in England to rise to £24.84 billion during 2021/22 up from £14.95 billion collected during 2020/21 if the business rates holiday isn’t extended, as part of a basket of wider business support, set to be announced at the Budget on Wednesday.
Robert Hayton, U.K. President of Property Tax at Altus Group, warns “ending the holiday too early is one material pressure on company finances that risks affecting the recovery from the pandemic now the end is in sight” adding “the Chancellor must use his upcoming Budget to ensure that viable businesses are adequately supported through a discerning targeted extension.”