What the latest numbers tell us
The ongoing theme of insolvency statistics in 2020 continues to be “when is the tide coming in?”
On the surface, the record low figures should be a cause of celebration that the industry has so far avoided the worst case scenarios painted by the effect Covid-19 will have on the wider economy and individual companies.
A total of 778 corporate insolvencies were recorded in August compared to 961 in July and 1,369 for the same month in 2019, down 43%.
The fall in CVLs from the corresponding period last year was 67%, CVAs are down 50%, compulsory liquidations are down 39% and administrations 38%.
As well as a huge reduction in the courts processing insolvency cases, there were also temporary prohibitions on the use of statutory demands and certain winding-up petitions beginning on April 27 and originally ending on 30 June. These have now been extended to 30 September under the terms of the Corporate Insolvency and Governance Act.
Government support measures for businesses will also have helped save some companies and delay the demise of several others. The Insolvency Service is careful to say that it specifically does not record whether an insolvency is directly related to the pandemic as it is not possible for them to state its direct effect on insolvency volumes.
More to come?
Colin Haig, President of R3, the trade body for the Insolvency industry said: “Despite this week’s news there’s no question that the pandemic is taking its toll on businesses and individuals but the impact is not being reflected in the insolvency figures yet.
“With a number of temporary Government measures aimed at reducing insolvency numbers set to come to an end on 30 September the situation may start to change before long.
“It’s a worrying time for the UK. Unemployment is increasing, business debt is rising and despite some growth in July, the economy is still nearly 12% below pre-pandemic levels.
“Our members are saying that requests for advice and support are becoming less restructuring-focused than they were at the start of the pandemic, and that enquiries for formal insolvency support are growing.
“We expect enquiry levels to grow even more as the furlough scheme ends next month and when CBILS loans become due for repayment early next year.”
It’s rare for anybody living through historical circumstances to recognise them as such but this year, for so many reasons, is different.
We won’t be getting back to business as usual as such because nobody knows what “usual” will be from this point.
Home-working, digital shopping, managing secondary outbreaks and waves might all become second nature and every business will have to adapt to these circumstances.
Some will be able to do it seamlessly, others won’t make it or even try while some could have a bright future if they begin to make necessary changes now.
Get in touch with us now to see what we can do to help you decide which path you can follow.
We can help you start to make essential changes to your finances and business structure right now to be able to withstand any future financial headwinds that blow through the country or help you see through any personal and professional changes you’ve decided to make.