South Wales in Focus

Total company insolvencies registered in 2022 leapt by 57% to 22,109 from the previous year, new data from the Insolvency Service revealed.

Experts said the rise was partly driven by the end of coronavirus support measures by the Government to support firms during the pandemic as well as weaker consumer demand.

The increase was also partially linked to the higher number of companies operating in total during the year.

The Insolvency Service reported the rise was driven by the highest number of Creditors’ Voluntary Liquidations since records began in 1960.

Creditors’ Voluntary Liquidations are a process which allow directors to voluntarily fold their insolvent firms.

Administrations also increased against 2021 but were lower than pre-pandemic levels.

The final quarter of 2022 showed that insolvencies continued to accelerate during the year, as they increased by 7% to 5,995 compared with the previous three-month period.

Christina Fitzgerald, president of insolvency and restructuring trade body R3 and partner at Edwin Coe LLP, said: “2022 was the year the insolvency dam burst.

“After nearly three years of trading through a pandemic, and in the face of the end of Government support, rising costs and a cost-of-living crisis, many directors simply ran out of road this year and chose to close their businesses before the choice was taken away from them.

“Alongside this, the end of the Government’s temporary legislation on winding-up orders has left creditors free to pursue unpaid debts, which is why compulsory liquidation numbers are at their highest in three years.”

David Kelly, head of insolvency in PwC’s restructuring and forensics practice, said: “Annually the construction, retail, accommodation and food services sectors were the hardest hit industries, a telling sign of the impact of rising costs and shift in consumer habits and the continued challenges certain sectors are facing getting and retaining staff.

“We are seeing many companies putting themselves in the shop window for a possible merger or acquisition, which is a sensible move in this environment helping redistribute capital.

“However, during the current challenging market conditions where values and appetite are uncertain, all options need to be considered including contingency planning for restructuring.”

The proposed HS2 high speed line from London to the Northern England was under discussion exactly ten years ago this week.

However, building HS2 between Birmingham and Crewe/Manchester is not yet beyond the strategic evaluation stage and so not guaranteed. If it were, parts of North Wales around Wrexham would benefit through driving to Crewe. North Wales will only benefit more generally if the North Wales Mainline is electrified to Holyhead. This will enable high speed trains to continue their journey on the existing track with higher line speeds.

This principle has worked well in France where TGV trains travel on new lines to, for example, Marseilles and on ‘classique’ track onwards to the Cote d’Azur. However that is the beneficial limit of HS 2 for Wales

South Wales receives an economic set back. Cardiff, Newport, Bristol and their hinterlands have benefitted from the creation of major company back-office functions employing highly qualified and relatively well-paid staff. This has brought an input of wealth into those areas. The attractions are the lower office space rental costs compared with London and south-east England and, for many employees, a better quality of life.

The current journey time between Cardiff and London is one hour and 50 minutes compared with Leeds (2h 20m) or Manchester (2h 08m). This attractive journey time competitiveness will be lost when HS2 delivers a journey time to Leeds and Manchester of only 1h 20m. Of course the underlying rationale for HS2 is to relieve congestion on the London – Birmingham route where the new journey time will be 49 minutes.

There are sound economic reasons for HS2 providing a levelling-off function for parts of northern England. However this scheme has been designated an ‘England and Wales’ scheme rather than an ‘England only’ scheme. This implies that Wales receives the same economic benefit from HS2 as does England but that rationale has no basis. The consequence is however financially disadvantageous for Wales’ government expenditure.

For all UK Government expenditure there exists in the financial relationship between the UK and Welsh governments the ‘Barnet consequential funding formulae’. Under this, 5% of England’s domestic expenditure transfers into the Welsh block grant from Westminster to the Welsh Government. The expenditure so far planned for HS2 is £50bn giving Wales £2.5bn – and contribute to electrifying the North Wales Mainline to Holyhead and the South Wales Main Line to Swansea and Carmarthen.

These are all aspirations of Welsh Government in both the Network Rail 2024 – 29 network infrastructure expenditure period (referred to as control period 7) and in the longer term.

Of course Welsh Government could spend that funding on any aspect of expenditure but this column would prefer it spent on public transport.

Building HS2 then begs the question – why not an HS3 westwards to South Wales and the west of England?

In terms of population and distance from London, the Cardiff and Bristol urban agglomeration together with the South Wales industrial belt meet the criteria set down as a prerequisite for high-speed rail construction (Commission for Integrated Transport 2006).

The case was made for HS3 in 2010 with several studies (involving this columnist and others) through reduced journey times. Speeds then of 250 kph/156mph have risen in Europe to 300 kph/186mph would provide for a 50 minute journey between Cardiff and London. Even faster speeds being developed in China to reach 400 kph/248 mph and where currently the 1300 km/800 miles between Beijing and Shanghai takes 4h 30m.

This reduced journey time accessibility is an essential pre-condition for economic development. It will also provide a competitive mode to the M4 corridor which, though a critical transport artery for south Wales, is congested. Evidence from France’s TGV programme suggests that a significant number of the 100,000 car users could be enticed from their cars on the M4 onto HS 3.

HS3 would bring to South Wales regeneration, new employment opportunities, reduced journey times, increased track capacity and environmentally sustainable travel. It would also put south Wales on the inward investment map, particularly with further electrification to west Wales.

However all such schemes, large and small, have to be not just planned, but also constructed, if we are to achieve the net-zero emissions targets all governments claim they want.

• Professor Stuart Cole, CBE, is Emeritus Professor of Transport (Economics and Policy), University of South Wales

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