Cost of insolvencies to Government halved in 2021

The amount paid by the Government to workers because their employers went bust was cut in half last year, according to new analysis.

The Insolvency Service paid out £228.28 million from the National Industry Fund to people who lost their jobs as a result of administrations, liquidations or other insolvencies.

The figures, released following a Freedom of Information Act by real estate advisory firm Altus Group, showed a sharp decline on payment from 2020 as Treasury financial support helped many firms avoid collapse.

Payments in 2021 showed a £225.09 million fall, around 49.6%, from the £453.37 million paid during 2020.

A total of £146.19 million was paid out in redundancy pay whilst £46.53 million was for money that would have been earned working a notice, the data revealed.

It also said that £18.65 million went on unpaid holiday pay and £16.91 million on outstanding payments for wages, overtime and commission owed.

The slump reflected a 65% plunge in compulsory liquidations in 2021 compared with the previous year, while administrations dropped 48% to the lowest figure in almost 20 years.

The annual number of CVAs (Company Voluntary Arrangements), a controversial restructuring tool, were also at their lowest levels since 1993.

Experts said this heavy reduction in the number of insolvencies, and workers impacted as a result, was driven by support measures such as furlough and Covid loan schemes.

Robert Hayton, UK president of Altus Group, said: “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.”