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NEW DATA: Restaurant insolvencies cost British taxpayers £300m in employee payments

Albion cafe and restaurant

Insolvent companies that couldn’t pay their debts cost British taxpayers £298m in payments to former members of staff last year – with pub and restaurant closures among the biggest drivers.

The fee was paid out by The Insolvency Service, which is an agency of The Department for Business, Energy and Industrial Strategy.

Payments were made to ex-staff members as a result of their employer entering into either administration, liquidation, a CVA or another form of corporate insolvency.

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A total of £196.36m was paid out in redundancy pay during 2018 while £59.85m was for money that would have been earned working a notice period. The balance went on holiday pay and outstanding payments like unpaid wages, overtime and commission, according to data released to real estate adviser Altus Group.

The amount paid was up by almost a third on the previous year, £70.63m higher than the £227.44m paid during 2017, the highest amount paid out of the National Insurance Fund since 2013, driven by the high street crisis.

A number of restaurant chains were forced into restructuring deals with their landlords and closed hundreds of stores, while the number of pubs continued to decline.

Insolvencies at food and beverage establishments rose by 17.9% last year versus 9.5% in the retail sector as a whole. Overall, 17,439 companies in England and Wales collapsed in 2018.

Robert Hayton, head of UK business rates at Altus Group, suggested that rising costs such as business rates was a factor in the number of companies in trouble.

“Whilst business rates are rarely the sole driver for insolvencies, they certainly are a contributory factor and government needs to fully understand the impact of the actual level of this tax on businesses not just for those on the high street but across all sectors.”

The Ministry of Housing Communities and Local Government have confirmed that they expect Councils in England to collect £25 billion in business rates in April for 2019/20 up £206m with the standard tax rate exceeding 50% for the first time in April.

Insolvent companies that couldn’t pay their debts have cost taxpayers £3.07 billion in payments to former members of staff during the last decade.

Tags : Altus GroupfailuresInsolvenciesinsolvencyresearch
Andrew Seymour

The author Andrew Seymour

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