Corporate Insolvencies in Britain Drop Amid the Covid-19 Pandemic

The lockdown imposed in the United Kingdom due to the novel coronavirus has severely impacted the nation’s businesses. The companies are not able to generate revenue and are finding it hard to provide salaries to the staff during this crisis. Almost all the sectors have been ravaged due to the pandemic, but the sectors like retail, aviation, hospitality are the most affected as they are not able to operate due to complete lockdown in the United Kingdom. Amid all this gloom, there is some positive news for the British economy, as sixty-one companies fell into administration during April 2020 as compared to ninety-one in the year 2019. An analysis of KPMG has revealed that the different measures announced by the British Chancellor Rishi Sunak have supported lots of companies from falling into administration, such as furloughed scheme, Loan guarantees for business, Cash grants, Sick pay and Business rates etc., to support the companies throughout the lockdown

Just a day ago, the Bank of England (BoE) had come up with a stern warning that the pandemic would lead the country’s economy near its deepest recession in history. The apex bank has already urged the companies to cut their dividends and bonuses so that they can be prepared to avoid the cash crunch for the coming months and evade unnecessary insolvencies.

As per the latest report of credit-connect, the Insolvency Service data and news provider, insolvencies in the first quarter of the year 2020 for the areas of England & Wales reduced by 8.5 per cent as compared to last quarter of the year 2019. The decline was of the same magnitude when compared to the same quarter in the previous year. Creditors’ Voluntary Liquidations, which is a major factor driving companies to bankruptcy, has also dropped by 10 per cent in the first quarter of the year 2020 as compared to the fourth quarter of the year 2019. In contrast, while the drop was less severe, by 6 per cent against the same quarter in the previous year.

KPMG’s, Blair Nimmo was reportedly stated that the different supportive actions from the government have prohibited the companies from entering into insolvencies but also warned that this crisis was severe and the path is uncertain, further adding that bankruptcies for some might have been just delayed. He said that the measures announced have given a mere opportunity to the companies to postpone their operations even though they realise what the consequence would be and how they could gain the support schemes.

Meanwhile, the British authorities have charted plans to ease the lockdown with limited measures in a few days. Still, the complete restart of the UK economy is not possible and the Prime Minister, Boris Johnson as would definitely want to restrict the second wave of infections at any cost.

Since the start of novel coronavirus pandemic, many of the good brands have already fallen into insolvencies such as retailers Oasis and Carluccio’s restaurants.

Some of the global companies which went into insolvency in the year 2020 after the outbreak of Coronavirus

The novel coronavirus has become a serious concern for businesses all across the world. Not only the established businesses but many of the start-ups are almost on the verge of shutting down even before they start some earnings, because of which many people are losing their jobs. The demand for many of the products has also changed due to the shift in the requirement of people. Now a day, people are purchasing only those products, which are required for their day to day life such as food, sanitiser, health products, and cleaning products, etc.

These factors have impacted the companies around the world as many of their products and services are not being delivered, or companies are not able to make them available due to complete lockdown. Let’s take a look at some prominent companies which have entered into bankruptcy in the year 2020:

Bright House – The company, which is a rent-to-own firm in Britain, have entered into the insolvency. The company halted it all operations on 30th March 2020.

Carluccio’s – Carluccio is an Italian restaurant chain in the United Kingdom. On 30th March 2020, it has also entered bankruptcy as the company had to shut down its seventy-three outlets in the country.

Debenhams – The company was one of the leading fashion retailers in the United Kingdom. On 6th April 2020, the company entered into liquidation. The company was already facing many challenges in operating all its outlets in Ireland.

Edcon – Edcon is a retail company of South Africa. On 29^th April, it also filed for business rescue. The company had suffered a severe loss in sale due to novel coronavirus outbreak.

Flybe –The airline company, which is a part of British Airline. It is one of the leading airlines in the Europe. It also had halted its entire operations as the company entered into administration.

Earth Fare – The company is an organic grocery chain in North Carolina. The company also closed all its outlets and liquidated all its inventory due to insolvency.

Foodora – The company is an online food delivery brand and the subsidiary of berlin-based delivery Hero. It is going to close all its operation from 11th May 2020 in Canada, after the announcement of its insolvency in the country on 27th April 2020.

Frontier Communications – The company is one of the biggest telecom company in the United States. On 14th April 2020, the company announced its reorganisation plan.

Hin Leong – The company is an oil company based in Singapore. On 18th April 2020, it also filed for bankruptcy as it has already faced challenges due to $800 million of previous undisclosed losses.

There are many other companies, which are facing a cash crunch and may be forced to enter the administration due to novel coronavirus crisis. However, it is very crucial to understand that Government support must carry on by providing constant help to the companies until the novel coronavirus ends. It is also equally essential that industries should return to work to avoid any job losses, which is a crucial matter for the government and the economy.