Global Insolvency Pandemic trends – why is the UK an outlier?

Global Insolvency Pandemic trends – why is the UK an outlier?

May 27, 2022

As the Coronavirus outbreak morphed into a once-in-a-century pandemic in early 2020, governments all round the world started to pour unprecedented sums into their economies in a frantic effort to support individuals and prevent viable businesses from filing for insolvency prematurely.  The UK provided a boost of well over £300bn through a bewildering variety of schemes. Over two years on, the impact of these extraordinary measures on insolvency filings round the world is starting to become clear.

Global insolvency trends

Opus was asked recently by the BBC World Service to extract statistics for quarterly and annual business insolvencies from official government sources so that trends for annual and quarterly filings between the beginning of 2019 and the end of 2021 could be analysed. We looked at a range of major economies around the world, specifically the UK, Europe, the USA, Canada, Australia, Japan and South Africa.

The UK is a major outlier

Business failures levels in the UK differ very significantly. In the first year of the pandemic, UK insolvencies fell by more (43%) than any of the other jurisdictions. Then in 2021 they rose by more (29%) than any other country.

Most significant of all, in the final quarter of 2021 they were closer to pre-pandemic levels in Q4 2019 than elsewhere. UK insolvencies in Q4 2021 were within 2% of regaining pre-pandemic figures, while the USA and Australia were still 45% down, France was 40% behind, Germany was 32% less and Japan’s was 30% below. Europe as a whole still had insolvency filings 27% lower than pre-pandemic.

Why is the UK economy behaving so differently?

We have identified four possible explanations for the comparative strength of UK insolvency statistics.

Pre-pandemic weakness

Opus undertakes detailed market sector studies on a regular basis. This research has shown that several of the sectors most seriously disrupted by the pandemic, such as hospitality and retail went into the crisis with high levels of financial vulnerability, most notably with many balance sheets significantly weakened by high levels of debt, negative working capital and liabilities greater than their assets. Too many businesses had no reserves of financial fat to withstand the Covid shock.

Government-backed loans are still repayable

UK banks lent £80bn to almost a third of all businesses through government-guaranteed loan schemes. Similar arrangements were put in place through the Paycheck Protection Program in the USA and as part of the EU’s Temporary Crisis Framework. The key difference is that unlike in the UK, where the banks are still expecting their loans to be repaid in full, elsewhere around the world the comparable support is being written off or forgiven by being turned into non-repayable ‘subsidies’ or through debt for equity swaps.

There is a clue in the title of the biggest UK loan scheme – The Bounce Back Loan Scheme. The assumption is that the loans were to tide businesses over a bad patch until they would recover. That was probably a fair assumption at the start of the crisis when the expectation was for a relatively short period of disruption. Successive lockdowns and endless restrictions over two years have made this approach highly dangerous for UK corporate borrowers.

Small business debts have mushroomed

Out of the total UK Coronavirus loans, £46bn was provided through the Bounce Back scheme with virtually no credit underwriting or any questions asked. The result was balance sheet mayhem for businesses throughout the UK. The borrowings of small companies in the hospitality and retail sectors have risen since the start of the crisis by between 200% and 300%. Coupled with the continued insistence by the government and the banks that this debt must be repaid, this has prompted large numbers of struggling entrepreneurs to call it quits and put their companies into Liquidation.


Political considerations have made the real impact of Brexit (which started in earnest with the ending of the Transition Period on 31 December 2020) on the UK economy the subject of heated debate and much misinterpretation of data. Wherever the truth lies, it seems unlikely that walking away from normal relations with the UK’s largest trading partner nine months into the greatest economic crisis in living memory can have had a positive effect on the confidence and prospects of businesses reliant on that trade.

What next for global and UK insolvencies?

The war in Ukraine and the zero-Covid lockdowns in China have moved the dial considerably for insolvency prospects in 2022 and beyond. A report published in May 2022 by trade insurer, Allianz now predicts that global corporate insolvencies will rise by 10% in 2022 and 14% in 2023. Many countries will still be below pre-pandemic levels even at the end of 2023, although Europe is set to suffer most with disruption from the Ukraine conflict.

The prediction for the UK is far starker: Allianz forecasts that business failures will soar in 2022 by a further 37% to a figure of over 22,000. This level was last seen in the aftermath of the global financial crisis of 2008/9.  Thereafter, insolvencies will start to level out with only a 4% rise in 2023. On this basis, the UK will still be an outlier at the end of 2023, compared to other major economies.

Hear more about global insolvency trends

The BBC World Service has broadcast an analysis of global insolvency trends, using the Opus research as its basis. You can listen to the programme here.

However, if you would like to discuss this article or have any concerns about this topic,  you can contact us at your nearest local office to arrange a no obligation and confidential call with one of our Partners.