Insolvent companies across all sectors of the British economy which couldn’t pay their debts have cost British Taxpayers almost £250 million during the first 6 months of 2020, with the amount paid to former members of staff up £133.79 million on the same period during 2019 despite the Government’s furlough scheme.
Under the scheme announced in March by the Chancellor Rishi Sunak, employers could claim a grant covering 80% of the wages for a furloughed employee, subject to a cap of £2,500, with the Office for National Statistics saying approximately 7.5 million in June 2020 were temporarily away from work with over 3 million of those being away for three months or more.
Despite the large number of employees furloughed between 1st January and 30th June 2020, The Insolvency Service an agency of The Department for Business, Energy and Industrial Strategy paid out a total of £244.16 million to former members of staff after their employer entered into either administration, liquidation, a CVA or another form of corporate insolvency according to Altus Group.
A total of £170.39 million was paid out in redundancy pay, whilst £42.67 million would have been earned working a notice period. The balance went on holiday pay and outstanding payments such as unpaid wages, overtime and commission according to data released to Altus Group under the Freedom of Information Act.
During the same period in 2019, £110.37 million was paid out of the National Insurance Fund. The 121% increase in the overall claim on the fund was driven largely through high street failures as firms struggled to stay afloat with the enforced national lockdown brought about by the pandemic.
Experts at the Centre for Retail Research say that there were more insolvencies at large retailers during the first half of 2020 than during the whole of 2019, with a host of household names likes of Laura Ashley, Debenhams, Monsoon & Accessorize, Oasis & Warehouse, Cath Kidston, Quiz, Victoria’s Secret, Oakland Furniture, Go Outdoors, TM Lewin and Benson Beds/Harveys Furniture all pursuing insolvency processes during the first half of the year.
The Government has delivered £26.94 billion in financial assistance to the retail, leisure and hospital sectors across the whole of the UK this financial year making £14.76 billion available in one off cash grants worth up to £25,000, whilst writing off annual business rates bills to the tune of £12.18 billion.
With the business rates holiday set to end on 31st March next year, Robert Hayton, Head of Property Tax at Altus Group, says appeals citing the pandemic as a material change in circumstances allow businesses to have their Rateable Values significantly reduced to reflect the impact of the coronavirus. He stressed settlement of those appeals must take place quickly ahead of the next financial year adding “as conditions improve values will then be able to track those improvements ensuring fairness, a form of phasing in if you like. These appeals should supplement discerning targeted additional support for viable, vibrant retail that is now struggling.”
Summary of Insolvency Freedom of Information Data:
|H1 2020*||Redundancy Pay||Holiday Pay||Arrears of Pay||Notice Pay||Total|
|* 1st January to 30th June 2020|