Corporate insolvency payouts rise to five-year high

James Salmon, Director, 7/03/2019.

Corporate insolvency payouts rise to five-year high

Corporate insolvency payouts are rising as the cost of insolvencies are passed on to the Government. Taxpayers are picking up the bill for insolvent companies, with National Insurance Fund payouts to redundant staff reaching a five-year high of £298m last year. The 2018 total marks a dramatic 31% increase in corporate failure costs from 2017, driven largely by challenging conditions for pubs, restaurants and brick-and-mortar retailers, after thousands of high street stores and hospitality sites closed last year. In total, 17,439 companies in England and Wales collapsed in 2018.

According to official data, the insolvency service gave out £196.36m in redundancy pay for employees of insolvent firms, with a further £59.85m paid to cover wages lost due to the lack of a notice period. Holiday pay, overtime and unpaid wages were all also covered by the insolvency service. Insolvencies among food and beverage companies increased by 17.9% last year, whilst retail insolvencies were up by 9.5%.

Hospitality and retail firms face difficult conditions

High business rates, rising rent and wage costs, low consumer confidence and disruption from e-commerce have all been blamed for jeopardising retail and hospitality businesses in recent months. In addition, hospitality chains such as pubs have been impacted by increases to alcohol duty, which in conjunction with business rates and VAT have made cost pressures on many pubs untenable. Data from the Office for National Statistics show that over 25% of all UK pubs have closed in the last ten years, with small businesses disproportionately affected.

In the restaurant sector, major companies including Prezzo, Byron, Gourmet Burger Kitchen, Carluccio’s, Strada and Jamie’s Italian have all closed sites in a bid to cut costs, with a 24% increase in restaurant insolvencies and a 2% drop in the number of restaurants across Britain – equating to more than 10 closures each week.

Standard tax rate to pass 50%

Unfortunately for businesses, little looks set to change. Physical retailers with rent and shop floor wage costs remain at a disadvantage to online competition. Government officials have announced that the standard tax rate is set to exceed 50% for the first time this April, whilst consumer and investor confidence looks set to remain low amid a rise in personal insolvencies and the ongoing uncertainty surrounding Brexit. To avoid insolvency, businesses are advised to instate strong accounting systems to closely monitor cashflow and identify any issues as soon as possible. By giving themselves more time to mitigate risks and find funding solutions, companies will put themselves in a better position to weather a potential collapse crisis

About CPA

The Credit Protection Association can help!

Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.

At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.

We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.

Companies in trouble usually have very bad bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.

If you supply on credit, help us help you identify the risks.

As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.

Over the years we have collected billions in overdue invoices for our customers.

Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.

Ready to speak to an advisor?

For help or advice on credit management, entirely without obligation.

Call us today

0330 053 9263

The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!

Keep up to date with the latest news by following us on social media:-

CPA on Linkedin

CPA on facebook

CPA on twitter

See all our latest news here!

Read our blog here on how to break the late payment culture.

visit our late payment compensation page

See our full blog and FAQ on late payment compensation

How to overcome 25 of the most common excuses for non-payment

Discover how to improve your cashflow in 3 steps.

Read our blog – Debt collection agency

Read our Cash Flow Advice

Read about our overdue account recovery service

Read our blog – What is credit management?

Read our blog -What is a credit management company?

Read our blog -Credit Management that works!

Read our blog – How to select a debt collection agency

click to see read about our successes