Highest insolvency cost in seven years driven by hospitality

24 February 2020 by
Highest insolvency cost in seven years driven by hospitality

A total of £346.11m was paid out last year, the highest level since 2012, driven by hospitality business insolvencies.

This is according to data released to real estate adviser Altus Group under the Freedom of Information Act.

The Insolvency Service, an agency of the Department for Business, Energy and Industrial Strategy (BEIS), paid the figure to former members of staff as a result of businesses entering into either administration, liquidation, a CVA or another form of corporate insolvency.

A total of £222.54m was paid out in redundancy pay while £63.93m was for money that would have been earned working a notice period. £18.29m went on unpaid holiday pay and £41.35m on outstanding payments for wages, overtime and commission owed.

The amount paid was up by 16% on the previous year, £48.04m higher than the £298.07m paid during 2018, the highest amount paid out of the National Insurance Fund since 2012, driven by the high street crisis as a result of a rise in insolvencies across the retail and hospitality sectors.

Insolvencies at accommodation, food and beverage establishments rose by 10.4% in 2019 as business battled the ‘perfect storm' of rising costs from business rates, historically high rents and minimum wage rules at a time of falling sales amid Brexit uncertainty.

Robert Hayton, head of UK business rates at Altus Group, 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."

Photo credit: Shutterstock

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