English company insolvencies hit 10-year high as COVID support fades

High SA

28/04/2022 12:12

By David Milliken
    LONDON, April 28 (Reuters) - Company insolvencies in England
and Wales rose to their highest since 2012 in the first three
months of this year following the end of emergency COVID support
measures, while individual insolvencies were the highest since
2018. 
    Insolvencies fell sharply during the coronavirus pandemic,
when 1.7 million businesses were propped up by 80 billion pounds
($99.9 billion) in government-backed loans and there was a ban
on many court proceedings to force businesses into liquidation.
    But many firms have come under more pressure since the
government stopped providing new pandemic loans in May 2021 and
as protection from court proceedings has been phased out over
the past six months.
    "It's clear we're witnessing a catch-up effect," said Jeremy
Whiteson, an insolvency partner at law firm Fladgate. 
    "Some companies have been beyond rescue for some time, but
were able to delay formal insolvency thanks to the government
support measures and the restrictions placed on creditors."
    A total of 4,896 companies became 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 a deal outside court - hit the highest since records began
in 1960 but compulsory liquidations stayed below pre-pandemic
levels.
    Company insolvencies were likely to rise further in coming
months due to surging operating costs and the recent removal of
the last pandemic-related court protections, Whiteson said.
    Personal insolvencies are also on the increase. The number
of individual insolvencies in England and Wales was 14% higher
than a year earlier at 32,305, equivalent to 0.24% of adults and
the highest number since the final quarter of 2018.
    Part of the increase reflected a June 2021 change to one
form of bankruptcy protection, debt relief orders, which can now
be used to write off personal debts of up to 30,000 pounds, up
from 20,000 pounds before, statisticians said.
    Households will come under increasing strain 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 had reported they were finding it harder
to pay their bills than a year ago, up from 17% in November.
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 (Reporting by David Milliken
Editing by William Schomberg)
 ((david.milliken@thomsonreuters.com; +44 20 7513 4034;))