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Taxpayers funded a surge in redundancy payments last year after a spate of High Street shop and restaurant failures, a study shows.

The amount paid out by the government’s Insolvency Service rose to its highest level in seven years, figures obtained by property advisor Altus Group show.

It follows a number of high-profile failures, including Mothercare and Thomas Cook. As a result, the Insolvency Service picked up a £346m bill, Altus says.

That was 16% higher than in 2018.

A freedom of information request by the real estate consultancy revealed that £223m of last year’s bill covered redundancy payments.

Another £64m was for money that would have been earned if staff had worked a notice period.

The rest covered unpaid holiday, as well as outstanding payments for wages, overtime and commission that were still owed to employees after a business went bust.

Although the taxpayer shoulders the initial cost of insolvency payments, attempts are made to recover as much as possible from the company’s assets – but that can take a long time.

The Centre for Retail Research said that more than 16,000 stores closed last year. As a result, the sector shed more than 143,000 jobs.

That has put pressure on new Chancellor Rishi Sunak to reform the business rates system, which has been blamed for the increase in failures on the High Street.

Robert Hayton from Altus said business rates had contributed to the number of insolvencies last year, although it was rarely the sole reason that a company failed.

Nevertheless, he said: “A fair and reformed system is within our grasp.”

“If we are serious about ‘levelling up’ the economy to help struggling towns, rates bills must fall in line with declining rents whilst speeding up meritorious business rates appeals has to be a government priority.”

 

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