Fewer firms going bust during uncertain times
THE number of companies going bust has fallen dramatically in Wales – but businesses across the UK fear they may not survive once Government financial support ends.
Between March 24 (when lockdown started) and June 30, 97 companies in Wales filed for insolvency, according to data from the BBC Shared Data Unit. That’s down from 160 in the same period in 2019.
An economist from the Institute for Fiscal Studies said problems for businesses would have been worse without Government support but many faced high levels of uncertainty going forward.
Some parts of Wales have seen a big drop in insolvencies (from 72 in 2019 to 12 in Swansea) while others have seen numbers rise (from one to nine in Carmarthenshire).
While some businesses may be struggling, others are much more optimistic – 4,515 new businesses were registered in Wales in April to June.
Across Britain, around 5,000 companies have filed for insolvency since March, down compared with 6,500 last year.
The drop follows a spike in March around the start of lockdown.
The Shared Data Unit analysed data from the London Gazette, the official journal of record that carries notices of corporate insolvencies.
Information and communication companies have been hardest hit, with insolvencies rising by 32% during lockdown compared to a year before. Businesses most affected by lockdown closures and social distancing have seen big drops in insolvencies – down 83% for accommodation and food services, and 65% for art, entertainment and recreation.
The fall in companies going bust is likely a combination of economic support, such as loans, business rate relief, tax deferrals, top-up grants, and the furlough scheme.
A change in the law also means if a firm cannot pay its debts due to coronavirus, its creditors cannot apply for it to be wound up until the end of September. This, and courts likely handling fewer insolvency cases, would also contribute to the drop.
IFS economist Stuart Adam said that without intervention, the situation might be worse, but businesses coming out of lockdown faced multiple challenges.
Social-distancing measures, reduced spending, larger debt and general market uncertainty could all have an impact, he said.
He said: “Since many firms will undoubtedly shrink or go out of business and jobs will be lost – especially as the furlough scheme comes to an end – it will be vital over the coming months and years for others to start up or expand, to fill the gap and employ those left out of work.”
The UK Government said its Plan for Jobs, announced last week, would increase help through Jobcentres to people looking for work. There was also the Kickstart Scheme, a £2bn fund to create hundreds of thousands of new, fully subsidised jobs for young people.
A HM Treasury spokesperson said: “As the economy reopens, we will continue to look at how to adjust our support in a way that ensures people can get back to work, protecting both the UK economy and the livelihoods of people across the country.”