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UK Facing ‘Solvency Crisis’ with Nearly a Million Companies at Risk

Written by: Keith Tully

Getting out of business signThe government is being urged to take proactive steps to support the many thousands of companies across the UK that are facing the prospect of being forced out of business in 2021.

Former prime minister Gordon Brown has written an introduction to an in-depth research report that suggests more than 900,000 British businesses could fail this year unless action is taken by policymakers in Westminster and elsewhere.

Although the government is praised in the report for introducing the furlough scheme and providing low-cost loans to businesses in recent months, concerns are raised too about the longer-term prospects of a huge number of currently struggling companies.

Indeed, the report calls for urgent action to be taken by government to ensure that the “liquidity crisis of 2020” doesn’t evolve to become the “solvency crisis of 2021”.

Worryingly, the latest estimates of researchers at the London School of Economics (LSE) are that close to one in seven UK companies could face collapse in the coming months unless they get the help they need to survive.

As Mr Brown emphasises in his introduction to the LSE report, those companies equate to several millions of jobs and livelihoods of people across the country.

“The crisis is so extensive that between 8 per cent and 9 per cent of total employment in businesses is in the ‘at risk’ category,” Mr Brown wrote.

“Not surprisingly the figures show that micro enterprises with fewer than ten employees are particularly vulnerable to closure.”

A particular concern raised by the former prime minister and by the LSE report authors is that a huge number of companies might be left with few financial options from April if the government ends its main business support programmes.

The report warns that there could be a “major wave of bankruptcies for UK firms” if the government’s various support schemes are allowed to expire.

Mr Brown has called for the chancellor Rishi Sunak to take bold steps in support of small businesses in his next Budget, which is scheduled to be delivered in March.

“If we are to save good small businesses that are innovative and forward looking but which, without help with their investment plans, are in danger of going under, the Budget must bring forward measures,” he wrote. “It is time to offer new hope to what will otherwise be dying firms.”

Keith Tully

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Keith Tully
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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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