Sunday, May 22, 2022

Surge in liquidations predicted as Covid protection measures come to an end

Compulsory liquidations of struggling UK businesses have surged 76% from 139 to 245 in the last three months, says international audit, tax and advisory firm Mazars.

The company says even more liquidations are expected in the next three months as the last temporary Government measure to protect companies from insolvency during the pandemic expires tomorrow.

Creditors owed £750 or more will now be able to submit winding-up petitions against businesses – previously companies had to owe £10,000 or more to be liable for winding up by creditors.

Michael Pallott, Partner at Mazars, says many firms have been struggling with the impact of interest rate rises, inflation and supply chain issues, driving up the number of businesses going insolvent.

The decision not to extend the remaining pandemic insolvency measures means that the insolvency regime for England & Wales will return to its pre-pandemic system. Measures the Government adopted to help shield struggling businesses from insolvency included:

  • Additional hurdles to issue winding up petitions
  • A ban on commercial landlord evictions
  • Restrictions on exercising commercial rent arrears recovery

He said: “The end of the Covid-related insolvency protection measures comes at a very bad time for many businesses. Liquidations are already rising and many more are likely to be coming.

“Some businesses have been kept alive for two years by furlough, CBILS and BBLS and the additional barriers put in place before their creditors could use the compulsory liquidation process. Some will reach the end of the road in the coming months.”

“With interest rates rising and inflation spiralling, a lot of businesses are looking at some very difficult months ahead. Pandemic-related insolvency measures could not be extended indefinitely and this now paves the way for creditors who are owed £750 or more to instigate insolvency proceedings against financially distressed businesses.”

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