Taxpayers foot bill for retail insolvency payouts

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Taxpayers foot bill for retail insolvency payouts
2019 saw the UK retail sector heavily impacted by a raft of administrations, including Mothercare and Debenhams. (Image: Rui Vieira/PA Wire)
// £346.1m paid out by The Insolvency Service to former staff of businesses that ran into trouble last year
// The cost of payouts to redundant staff jumped 16% and is the highest in 7 years
// The recent raft of retail insolvencies contributed to the increase

Taxpayers picked up the bill for a wave of insolvencies last year, with the cost of payouts to redundant staff jumping by 16 per cent.

A total of £346.1 million was paid out by The Insolvency Service to former employees of businesses that ran into trouble during 2019, according to a Freedom of Information request made by real estate adviser Altus Group.

The payout was the highest in seven years, with the recent raft of retail insolvencies contributing to the increase.


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Last year, the number of retail insolvencies in England and Wales rose by 3.9 per cent while insolvencies at food and beverage establishments jumped 10.4 per cent.

Insolvency Service payments comprised £222.54 million of redundancy pay, while £63.93 million was for money that would have been earned working a notice period.

The rest was spent on holiday pay, unpaid wages, overtime and commission, Altus said.

This included companies which entered administration, liquidation, CVAs or another form of corporate insolvency.

The figures come following a year which saw the UK retail sector heavily impacted by a raft of administrations, including Mothercare and Debenhams.

New Chancellor Rishi Sunak has come under pressure from retailers and business groups to reform the business rates system which has been blamed for the increase in high street insolvencies.

Altus Group head of UK business rates Robert Hayton said: “A fair and reformed system is within our grasp.

“If we are serious about ‘levelling up’ the economy to help struggling towns, rates bills must fall in line with declining rents whilst speeding up meritorious business rates appeals has to be a government priority.

“Bringing some respite to the financial burden of rates through ending annual inflationary rises whilst incentivising, rather than penalising, investment will all deliver long term lasting benefit to the economy as a whole.”

Councils in England last week said business rates income for the 2020-21 year will be £25.6 billion, an increase of £649 million, or 2.6 per cent, on 2019-20.

with PA Wires

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