Bankruptcies set to swamp UK economy

The UK economy faces a long and winding road to recovery

When the governor of the Bank Of England openly declares that Britain was on the brink of insolvency from early on in the Coronavirus crisis and warns that the UK economy could still worsen as the catastrophic effects of the pandemic continue to bite, then everyone in the financial sector sits up and listens.

Andrew Bailey also revealed in a Sky News podcast that the Government would have struggled to fund itself had the bank not intervened with £200 billion in quantitative easing during the ‘market meltdown.’

The bank has since pumped a further £100 billion into the economy, but will that be enough? And what is enough? Despite positive predictions and upbeat messages from the Prime Minister, Chancellor and ministers, no one doubts that the three-month lockdown was devastating for the economy and that bankruptcies are on the way.

The only area of almost unanimous agreement is that most of us believe that the recovery will take years. 

In business and in industry, from theme parks to football clubs, from theatres to concert halls, basic survival has become the overwhelming priority, as companies cling to the wreckage and try to stay afloat.

The stark reality is that not all will make it. Recent figures show that almost half of UK companies do not have enough cash reserves to see them through more than six months.

The Government is trying to help with new measures on protection from bankruptcy, with a shake up of insolvency rules that will give firms greater leeway to continue trading. But with hundreds of thousands of new claims for universal credit being submitted, the fear is that unemployment will rocket.

The job retention scheme has helped in supporting the jobs market, but when that comes to an end, Bank of England Governor, Mr Bailey, warns that many indebted companies will struggle to finance themselves as the structure of the UK economy changes. It’s a grim picture, and with the uncertainty of Brexit just around the corner, the road to recovery will be rocky and fraught with danger.

What our surveys show

The threat of throwing good money after bad must be a consideration when banks weigh up whether or not they will support individual businesses on the verge of collapse during these perilous and turbulent times.

Studies are undertaken almost daily, figures are meticulously analysed, and ‘experts’ make their predictions, but no one can predict for certain which businesses will even have a viable future when the world finally emerges from the Coronavirus nightmare.

Our findings show mixed opinions on whether the Government has done enough to stimulate the economy during the crisis and who is to blame as business, big and small, hover on the edge of financial ruin, perhaps indicating that the public is as hesitant and tentative on this situation as the banks and Government have been.

The only area of almost unanimous agreement is that most of us believe that the recovery will take years.