Home General 5 Reasons Why Business Insolvency in the UK is at a 35 Year Low

5 Reasons Why Business Insolvency in the UK is at a 35 Year Low


The real reasons behind the UK’s record low numbers of business insolvencies in 2021 will be explored in this article.

No matter what industry or sector you’re in, starting a new business will always carry with it an element of risk. There’s nothing more disheartening than putting your heart and soul into a new business, only to see it fail. But, the good news for UK business is that, in February 2021, the number of business insolvencies and bankruptcies dropped by a record 49 percent compared to February 2020.

While this may be encouraging news for business owners – particularly during a global pandemic – many are pondering on the reasons behind these surprising figures. In this article, we’ll take you through the five reasons why insolvency lawyers in Portsmouth, Peterborough, and Penzance may be seeing a 35 year low in business insolvencies.

5 Reasons Why Business Insolvencies Are So Low in 2021

  1. Government financial support

As the COVID-19 swept the globe in early 2020, many businesses were forced to either close their doors or curtail their activities to slow the spread of the virus. The UK government, like many others, introduced measures which were designed to help companies to ride the storm of the pandemic. These measures included the furlough scheme, which ran from March 2020 to September 2021, and which helped businesses to retain staff.

Other forms of financial relief from the government included tax deferral schemes for businesses, and business rates relief. The latter proved to be something relied on quite heavily by the hospitality industry during the three UK lockdowns.

  1. Keeping the roof on business

In 2020, the UK government introduced a ban on the eviction of commercial tenants – a ban which is set to end in March of 2022. This has been a lifesaver for business owners, particularly those in the much beleaguered hospitality sector. It has meant that, even if rent payments on business premises are in arrears, landlords cannot legally proceed with eviction orders.

  1. Debt relief

The Corporate Insolvency and Governance Act (CIGA) 2020 stated that a winding up petition cannot be served on a company as follows: 

  • On the basis of a statutory demand;
  • Or on the basis of other evidence of a company’s inability to pay its debts unless the petitioning creditor has reasonable grounds to believe that COVID-19 had no financial effect on the company, or that the company would not have been able to pay its debts even in the case that there was an impact caused by COVID-19.

This act provided a significant number of UK businesses with the breathing space they needed during an extremely turbulent time.

  1. Funding and investment

In 2021, business owners have more options than ever before when it comes to funding. Whilst in the old days, business funding would rely on traditional banks and investors, the modern business is able to take advantage of a number of fundraising initiatives, including crowdfunding.

This popular method of raising cash is conducted online and involves the business owner gathering contributions from a number of investors to a set goal. This can be really effective when first starting a business, and also when a business needs a quick cash injection.

Additionally, business owners are now able to find and reach out to investors across the globe with just a few clicks; bringing the world – and the world of finance – closer than ever.

  1. Spreading the net wider

During the pandemic, a huge number of businesses were forced to close their doors which, in days gone by, would have almost certainly meant going bust. While this was the case for some businesses, many were able to keep the wheels turning by moving their operations online.

During the first lockdowns, a lot of restaurants and pubs pivoted their businesses to offer home delivery instead of indoor dining. We also saw a great deal of innovation – for example, popular London restaurant chain, Cote Brasserie, was able to sail the stormy waters of the pandemic by creating ‘Cote At Home’. This was a side business that provided restaurant quality meals to be delivered to customers who would then simply have to put them in the oven.

The Future’s Bright for UK Business

Although some of the government endeavours for businesses have now finished, things are still looking hopeful for businesses in Great Britain. Many lessons have been learnt during the pandemic, and these have led to business owners putting contingency plans in place, should we be subject to more restrictions in the future.

Despite the country facing significant challenges, 726,000 new businesses were created in the UK in 2020 – an increase from 636,000 in 2019 – it’s expected that, when 2021’s figures shake out, we’ll see a similar increase. We may still have some tough times ahead, but a large number of businesses are confident in their ability to survive. With innovations such as home working, which allows some businesses to do away with paying expensive office rents and bills, and online fixtures, things are looking brighter than ever.

All of this shows that UK businesses are a resilient lot and, the future’s looking bright as we head into a new year.


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