Thursday 2 April 2020 5:52 pm

Accountancy firm criticises ‘alarmist’ prediction of 800,000 coronavirus insolvencies

Restructuring specialists at accountancy firm RSM said media reports that 800,000 to 1m UK businesses could collapse as a result of the coronavirus crisis are “alarmist at best”.

Yesterday, the BBC, citing an unnamed accounting firm, said 800,000 to 1m businesses, a fifth of the UK total, “may soon have to close”.

RSM partner Gareth Harris said: “I don’t believe that is a realistic number. That would be genuinely unprecedented and while we are in strange times I don’t believe that is a fair reflection.”

Harris said the number of companies to go bust as a result of the current crisis would probably be around 70,000-100,000.

Read more: Thousands of jobs at risk as Carluccio’s and Brighthouse collapse under coronavirus pressure

During the 2008-13 slowdown, 114,000 UK companies went insolvent.

“You are going to see a pretty sharp spike in insolvencies for businesses that were struggling before any of this happened,” he said.

“Then the mothballing and deferments will kick in and they will slow down insolvencies dramatically, then as that support falls away, that’s where you will see a further spike.”

Businesses such as restaurant chain Carluccio’s, retailer Laura Ashley, rent-to-own company Brighthouse and sub-prime lender Uncle Buck have all called in the administrators in recent days as the economy freezes up.

Harris said it was likely that there would be further insolvencies in the coming days and weeks as it will take a while for the government’s massive economic intervention to take effect.

Read more: Government to push through insolvency reforms as coronavirus crisis bites

The government has promised a massive cash injection into the economy, with smaller businesses eligible for a loan scheme and large businesses eligible for a government debt buying scheme.

The chancellor has also introduced a state-funded programme to furlough workers on 80 per cent of pay to help preserve jobs.

Read more: Treasury set to overhaul coronavirus loan scheme to avoid insolvencies