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Insolvencies on rise despite support

10th February 2021

Insolvencies on rise despite support

Nyree Applegarth, Higgs & Sons Partner in the Dispute Resolution And Litigation team, looks ahead to what might be a turbulent few months for hard-hit businesses.

It looks like we might be seeing the first signs of the dire financial implications for businesses as a result of Covid-19.

Last month, The Insolvency Service reported that company insolvencies in England and Wales rose for the first time since the pandemic hit. The number of companies that became insolvent in December 2020 rose to 1,228, which was a 9.2% increase compared with December 2019 and showed the first rise since February 2020. The bulk of those were Creditors Voluntary Liquidations (CVL).

While there were some high-profile insolvencies in 2020, unprecedented State support has depressed the number of insolvencies so far – but it cannot last forever.

The Government has implemented many measures to support companies, providing bounce back loans, rates relief and furlough, while banks and landlords have chipped in with their own concessions. However, it is almost inevitable that when the stay on forfeiture is lifted, the number of insolvencies is going to exponentially rise. 

A landlord’s hands have been tied for nearly a year now as they are prevented from changing locks where rents are unpaid.  Many businesses have kept up with their rent payments or agreed reduced rents with their landlords over the last 12 months. For many others where, despite the receipt of loans from the Government they have built up significant rent arrears, it is hard to imagine how they are going to be able to suddenly pay a year’s rent when they can re-open and landlords are able to take action. Inevitably, businesses are going to fold. 

In a buoyant economy, a landlord’s ability to change the locks is a powerful tool in its armoury, allowing them to act quickly and regain possession of a property if they have a new tenant waiting in the wings.  Given the devastating impact that the pandemic has had on the retail and leisure industries in particular, it is hard to see a queue of new tenants waiting to take over premises and, therefore, perhaps the reality will be that the expected rush of forfeiture instructions will not exist.

Higgs & Sons can help with all landlord and tenant disputes. Contact me on 01384 327151 or nyree.applegarth@higgsandsons.co.uk

 

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