UK business insolvencies hit 10-year high as COVID support fades


The City of London’s financial district is seen as people walk on the Millennium Bridge in London, Britain February 16, 2022. REUTERS/Henry Nicholls

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LONDON, April 28 (Reuters) – Business insolvencies in England and Wales hit their highest level since 2012 in the first three months of this year after emergency COVID support measures ended, while that individual insolvencies were the highest since 2018.

Insolvencies fell sharply during the coronavirus pandemic when 1.7 million businesses were backed by 80 billion pounds ($99.9 billion) in government guaranteed loans and there was a ban on many legal proceedings to force companies into liquidation.

But many businesses have come under more pressure since the government stopped making new pandemic loans in May 2021 and protection from legal proceedings was phased out over the past six months.

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“Clearly we are seeing a catch-up effect,” said Jeremy Whiteson, insolvency partner at law firm Fladgate.

“Some companies have been beyond bailout for some time, but have been able to delay formal insolvency thanks to government support measures and creditor restrictions.”

A total of 4,896 businesses went insolvent in the first quarter of this year, up from 4,615 in the last quarter of 2021 and double the number a year earlier, government figures showed on Thursday.

“Voluntary” liquidations – where creditors and companies reach an agreement out of court – have reached their highest level since records began in 1960, but compulsory liquidations have remained below pre-pandemic levels.

Business bankruptcies are expected to rise further in the coming months due to soaring operating costs and the recent removal of the last pandemic-related legal protections, Whiteson said.

Personal insolvencies are also on the rise. The number of individual insolvencies in England and Wales was 14% higher than a year earlier at 32,305, or 0.24% of adults and the highest number since the last quarter of 2018.

Part of the increase reflects a change in June 2021 to a form of bankruptcy protection, debt relief orders, which can now be used to cancel personal debts of up to 30,000 pounds, compared to 20,000 pounds previously, the statisticians said.

Households will be increasingly strained this year as inflation pushes up the cost of energy and food bills.

Britain’s Office for National Statistics said on Tuesday that 23% of households said they were having more trouble paying their bills than a year ago, down from 17% in November. Read more

($1 = 0.8008 pounds)

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Reporting by David Milliken Editing by William Schomberg

Our standards: The Thomson Reuters Trust Principles.


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