According to a recent Reuters’ article, more companies and individuals across the UK were declared insolvent in March 2021, although overall levels of insolvencies remain below pre-pandemic levels.
In the last 12 months, Britain’s economy contracted by around 10%, with millions of people still unable to work due to the on-going COVID-19 restrictions. Government-backed loans and the chancellor’s furlough scheme, which is due to end in September 2021, have helped most companies and households remain solvent, for the time being at least.
Commenting on the recent increase in the number of insolvencies, Christina Fitzgerald, vice president of insolvency and restructuring trade body R3, said: “The economic damage caused by the pandemic is starting to be reflected in levels of insolvency, but government support has postponed rather than prevented the true picture being shown in insolvency levels to date.”
Compared to March 2020 personal bankruptcies in England and Wales are around a third lower in March 2021, but insolvencies have been increasing since January 2021.
However, the number of IVAs (Individual Voluntary Arrangements) rose sharply in the first quarter of 2021, with 24% more IVAs being filed than for the same period in 2020. There are often delays in the reporting the number of IVAs, which would suggest that the actual rate is far higher than the government’s official figures.
When the furlough scheme finally ends, which has been paying 80% of salaries up to £2,500 per month, many anticipate a sharp rise in redundancies and insolvencies, as companies struggle to achieve pre-pandemic trading levels, especially in the leisure, hospitality and travel sectors.
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