Dependency on benefits in UK hits an all-time high, whilst insolvencies in December 2022 were 32% higher than December 2021 and 76% higher than pre-pandemic.
Antony Batty, Licensed Insolvency Practitioner comments on these figures which have their roots in the Pandemic.
In this article we look at, and comment on, two sets of recently published data: the first from the Office of National Statistics shows that record numbers of Britons are now dependent on the state for their income; the second from the Insolvency Service shows that insolvencies, especially Creditors Voluntary Liquidations are increasing quite rapidly.
More than half of half of UK households get more from the Government than they pay in tax.
Recent Analysis of Office for National Statistics data for 2020/21 by the Civitas think tank has found that a record 54.2% of British households (that’s c.36 million people) receive more from the state in benefits than they pay in taxes. This is a significant rise compared to 2000, when it was just 40.3%, and is also up on the previous high of 52.5% in 2013. The data also shows that 83% of all income tax is now paid by just 40% of British adults, with the top 20% of taxpayers accounting for 66% of the Treasury’s total income from earnings. The top 10% of taxpayers account for 53.1%.
There are many reasons for this increase, but Sir Iain Duncan Smith, the former Conservative Party leader, has commented that the Covid Pandemic has played a large part:
“Lockdown changed the psyche of the British people. For all those years, we told them you cannot get something for nothing, and all of sudden they did. The British public thought the Government could do it all – even pay their salaries and they don’t have to work.
The more we spend, the more we have to tax or borrow. The Government has to do something, and do it pretty quick. Start cutting taxes, and put money back into people’s pockets.”
In his November 2022 budget statement, the Chancellor Jeremy Hunt noted his concern about the:
“…sharp increase in economically inactive working age adults” since the start of the pandemic, announcing a review into the issues holding people back from work.
He also said that more than 600,000 people on Universal Credit will be asked to meet with a work coach “so that they can get the support they need to increase their hours.”
Insolvencies in December 2022 were 32% higher than December 2021 and 76% higher than pre-pandemic.
The number of registered company insolvencies in England and Wales in December 2022 was 1,964:
- 32% higher than in the same month in the previous year (1,489 in December 2021), and
- 76% higher than the number registered three years previously (pre-pandemic; 1,119 in December 2019).
Of these insolvencies, 1,659 were Creditors’ Voluntary Liquidations, 22% higher than in December 2021 and more than twice as many as December 2019. Numbers of Administrations and Company Voluntary Arrangements (CVAs) remained lower than before the pandemic but were higher than in December 2021.
From the start of the coronavirus pandemic until mid-2021, overall numbers of company insolvencies were low when compared with pre-pandemic levels. This is likely to have been partly driven by government measures put in place to support businesses during this time. Company insolvency numbers have now returned to and exceeded pre-pandemic levels, as support has ended. In addition, the current high inflation levels and significantly increased energy bills, along with supply chain issues and staff shortages are feeding through into increased insolvencies.
More insolvencies that end up in liquidations also means people lose their jobs, which will also feed into the increased dependency on the State detailed above.
Licensed Insolvency Practitioner Antony Batty comments
“We are receiving an increasing number of enquiries from worried business owners and directors right now who are really struggling to keep their businesses trading and solvent. For some, sadly, it is already too late, and liquidation, usually a Creditors Voluntary Liquidation, is the only option, and this is reflected in the Insolvency Service’s figures.
What is clear is that now is the time to take advice on your businesses’ future options if it is in financial difficulty. The quicker you take action the more we can do to help to turn things round and avoid liquidation. This in turn means that there would be fewer liquidations and fewer people would become unemployed and adding further to the numbers dependent on the State.”
Call our Insolvency Practitioners or send an enquiry now for a free initial consultation.
Also, K&W Recovery, trading as Antony Batty and Company, Thames Valley: