Chilly Autumn and a bleak Christmas – the story of the last three months of 2020
Like a lot of unsung official bodies, The Insolvency Service have gone above and beyond their duties in 2020 and beyond to bring us the most accurate data that can help us report on the real insolvency stories of the past three months and year as a whole.
We’ll look at the 2020 in the second part of this mini-series coming later this week but right now we’ll see what effects the quietest Halloween, Guy Fawkes Night and Christmas in over a century had on UK businesses.
Taken as a whole, the graphical interpretation of 2020 resembles something of a ski jump. Increasingly downhill before a sharp uptick at the end.
The overall number of company insolvencies from October to December 2020 was 3,071 – up 17% on the previous quarter and mainly driven by a rise in creditors voluntary liquidations (CVLs) and company voluntary arrangements (CVAs). All other company insolvency procedures decreased from Q3.
When compared to Q4 2019, all types of company insolvencies had fallen with the exception of CVAs while Company Insolvencies, CVLs and CVAs recorded increases on the previous quarter although as the relative numbers of CVAs (80) was small, growth rates as susceptible to volatility. .
The overall increase in company insolvencies in Q4 was from the rise in CVLs which account for over 75% of all company insolvencies.
Compulsory liquidations were down on the previous quarter and the same quarter in 2019 hugely by 55% and 80% respectively. Administrations were also down by 12% on the previous quarter and 27% on the same quarter the year before.
The Insolvency Service reiterate that as a result of pandemic itself and various support schemes including the Corporate Insolvency and Governance Act 2020 that came in in June the results would be skewed from the normal range.
They also note that two of the new tools created – insolvency moratoriums and restructuring plans – are not presented in formal tables as they are not formal insolvency procedures in and of themselves.
When it came to the individual sectors of the economy, all saw a decline in insolvency rates compared to 12 months ago.
Companies House also released their incorporation and dissolution statistics last week for Q4 2020 which also provides us with a snapshot of functioning UK companies at any period of time.
Like the suspension of winding-up petitions, there was a pause in the voluntary and compulsory strike-off process last year which would allow companies to take measures that would ordinarily have seen action taken against them to remove them from the register.
Voluntary strike-offs were resumed early in September so companies that applied to be struck-off or dissolved before July were included in the numbers which rose dramatically
At the end of the quarter and year there were 4,674,672 companies on the register. In the last quarter alone there were 201,820 incorporations and 161,837 dissolutions.
Chris Horner, Insolvency Director with Business Rescue Expert, said: “Taken in isolation, the figures from the final quarter of 2020 would be amazing but the reality of Covid-19 and the disruption followed by support measures for some industries means that any fluctuations are almost baked-in.
“It’s interesting to see that despite CJRS, CBILS and various grants and other offset measures operating, corporate insolvency levels still increased by nearly 17% in the last quarter, driven by this increase in CVLs.
“While the figures are still significantly lower than they were at this time last year, it might suggest that the effects of the pandemic are catching up with some businesses and pushing them into insolvency after they’ve been treading water for the majority of the year.
“If this is the case and financial gravity is beginning to reassert itself then it’s even more imperative to take steps to protect your business now especially as the Chancellor might not be as generous in his budget next month as he has been previously.”
We can work together on what the most immediate threats and issues facing you are and come up with a realistic and effective solution so that we can look forward to Spring and Summer with a real sense of anticipation.