Government halves insolvency payouts to workers in 2021
The government halved pay outs to workers whose employers went bust last year, as Covid-19 support measures helped stave off insolvencies.
The Insolvency Service paid out £228.28m to people who lost their jobs as a result of administrations, liquidations or other insolvencies in 2021, a drop of 49.6 per cent compared to the previous year when £453m was dished out, according to real estate advisory firm Altus Group.
The slump reflected a 65 per cent plunge in compulsory liquidations over 2021 compared with the previous year, while administrations dropped 48 per cent to the lowest figure in almost 20 years as firms were buoyed by emergency government support measures such as furlough and the Covid loans schemes.
“Fiscal and other support measures that were put in place by Government, including temporary restrictions on the use of statutory demands and certain winding-up petitions, have all played their part getting businesses through the pandemic,” said Robert Hayton, UK president of Altus Group.
In 2021, £146m was given out as redundancy pay whilst £46.5m was dished out to compensate employees who were prevented from working their notice period. An additional £35.5m was spent on outstanding holiday pay, unpaid wages, overtime and commission.
It comes as the annual number of Company Voluntary Arrangements (CVAs) a controversial restructuring tool, touched their lowest levels since 1993.
Nonetheless, while government support has hitherto supported businesses to ride out the storm of the Covid-19 pandemic, insolvency experts at Begbies Traynor have warned a wave of insolvencies could be coming this year as emergency measures are rolled back.
A total of 589,168 businesses reported financial distress in the final quarter of 2021, a five per cent jump compared to the previous three months, data from Begbies revealed.
Read more: Businesses brace for insolvency storm as Covid aid winds down