Cost of insolvencies to Government halved in 2021

The Insolvency Service paid out £228.28 million from the National Industry Fund to people affected by insolvencies.

Commuters near London Bridge, in central London (Dominic Lipinski/PA) (PA Wire)

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.”