Firm failures spike in second quarter as state support tails off

THE number of firms collapsing under the weight of the pandemic jumped by a quarter in the first half of the year, with more closures expected as the Treasury winds down its huge support.

Business “deaths” rose by 43pc year on year to 105,000 in the three months to June 30 after a delayed wave of collapses from the Covid crisis, experimental data from the Office for National Statistics revealed.

Closures rose to 217,000 over the first half of the year – the highest for at least four years when the data series began. Forecasters warned that more businesses were likely to succumb to the pandemic, but that a feared tsunami of closures was likely to be avoided after the recovery’s takeoff.

Much of the spike was blamed on “catch-up” collapses after the figures were suppressed last year by the Government pumping sup- port into firms.

James Smith, an ING economist, said: “A lot of businesses were supported by a lot of government support last year and even as some of that is removed that is going to create some issues.”

However, Mr Smith said there would not be a large increase in insolvencies in the coming months given Treasury support and the economy’s “vibrant recov- ery” in the second quarter.

Business closures were much higher than the national average in the East Midlands, Wales and Northern Ireland. The transport and storage, IT and finance sectors suffered the most closures, the ONS revealed.

The increase in deaths overshadowed 97,000 business births during the second quarter. It marked a slowdown from 137,00 firms that emerged in the first three months of the year

The Government has splashed out to stop the economy suffering significant scarring from the pan- demic, borrowing record amounts to pay for jobs and business support. HMRC data suggests almost £70bn was spent on the furlough jobs scheme. The Treasury also stood behind about £80bn of business loans.