What is the reason for the successive bankruptcies of British companies in recent months?
What damage has the Covid-19 epidemic done to British businesses and industries?
What is the reason for the sharp decline in cars in the UK in recent months?
What is the UK government’s plan to resolve the corporate bankruptcy crisis?
Data from the UK government released show that corporate bankruptcy in the UK and Wales reached its highest level since January 2019 last month, exceeding the pre-Covid-19 level for the first time. The successive bankruptcies of British companies are taking place at a time when the Boris Johnson government has no plans to resolve the crisis.
Registered 1674 bankruptcy cases in November
The Insolvency Service, a government agency, registered 1,674 cases of commercial bankruptcy in November, up from 1,410 in October. This figure mainly includes the voluntary liquidation of businesses, but also the companies that are included in the program of administrative and compulsory liquidation. According to the report, the number of business closures fell sharply last year when many businesses were backed by government support programs to combat Covid-19. The capacity of the courts has dwindled, and creditors have until recently faced restrictions on legal action that have slowed the process of liquidating companies. The successive bankruptcies of British companies have put the country on the brink of disaster.
Covid-19 epidemic damage to businesses
“Times are tough for businesses in England and Wales as the pandemic continues to take its toll on the economy and the firms that drive it,” said Christina Fitzgerald, vice president of insolvency and restructuring trade body R3. “Over the last few weeks, businesses have been hit by the triple whammy of increased costs, supply chain issues and rising COVID cases.” She added. Similar events are taking place in Scotland, where corporate bankruptcy in November reached its highest level since the start of monthly records in January 2019.
A sharp decline in car production in the UK
The successive bankruptcies of British companies have also affected the country’s auto industry. In October, car production in the UK fell by a strange 41.4% compared to the same period last year to 64,729 vehicles, the lowest figure in the country since 1956. Among the main reasons for the sharp decline in cars in the UK are problems such as lack of parts and the permanent closure of the Honda plant in Swindon. The only sector in which car production is on the rise is the electric car sector, which has more than 30 percent more production than electric and hybrid cars in the country compared to the previous year.
The production of clean fuel vehicles in this country during the last year has been about 44 thousand vehicles. It should be noted that the UK is one of the countries that has pledged to end the production of gasoline vehicles in its territory by the end of 2030, and it is likely that by 2050, more gasoline vehicles will be banned in this country.
The impact of Brexit on various British industries
The uncertain fate of UK’s exit from the EU, called Brexit, has had a devastating effect on a number of issues, including the auto industry, and as many analysts and experts in the automotive industry have estimated, many foreign companies are operating in the country. Under the influence of the Brexit, they will leave the country so as not to be caught in the aftermath and the negative consequences of Brexit.
Bankruptcy of private energy companies in the UK
Successive bankruptcies of British companies have affected all industries in the country. The UK government is on high alert following rising energy prices, the bankruptcy of several private companies operating in the sector and fears of possible power and gas outages. Paul Scully, the Under Secretary of State in the Department for Business, Energy and Industrial Strategy and Minister for London, has stated that he is in contact with the UK Oversight Authority to protect customers in the event that private companies continue to be liquidated. In recent months, electricity and gas distribution companies in the UK have bankrupted 1.5 million households and caused them problems. Avro Energy and Green also went bankrupt, and about 800,000 of their customers were transferred to other private companies with heavier contracts and higher tariffs. Afgem is responsible for determining the replacement company in this regard.
250% increase in gas prices
These events are taking place while the price of gas has increased by about 250% since the beginning of 2021 and companies that have concluded fixed price contracts with their customers can no longer afford to pay the difference in price increases. At the beginning of this year, there were more than 70 companies operating in the field of energy, but it is likely that this number will reach 10 by the end of this year. In other words, the electricity and gas distribution companies for one in four British households are projected to go bankrupt in the coming months.
UK is preparing for the worst
British news sources have attributed the crisis to rising electricity and gas consumption in Asia and declining energy resources. Paul Scully describes the current situation as temporary. Asked what the government’s plan would be if the gas price did not fall in the coming months, he said: “Clearly, as a government, we need to make sure we are planning for the worst-case scenario because we want to make sure we can protect consumers.”
Earlier in the day, the UK prime minister described the current crisis as a short-term problem stemming from the Covid-19 situation, which will gradually be remedied by market fluctuations. Boris Johnson explained that the government has considered financial packages to pass this stage. Meanwhile, the Business Secretary, Kwasi Kwarteng, stated in a speech to the House of Commons that the government would not provide financial assistance to companies that were going bankrupt. The current situation and the uncertainty about the future of the energy market in UK have caused great concern and panic among the public. Political parties and analysts have accused the Johnson government of colluding with energy giants in creating the crisis. The successive bankruptcies of British companies have sparked widespread criticism of Boris Johnson. They believe that Johnson is not enough to manage the crisis and the situation for businesses is getting worse day by day.
