Company insolvencies are down but remain higher than a year ago
This is because they’re more susceptible to immediate fluctuations rather than gradual trends.
The number of company insolvencies declining across the UK in July after rising for two consecutive months was still a slight surprise in the latest official monthly company insolvency statistics released by The Insolvency Service.
For England and Wales, the total number of corporate insolvencies for last month was 1,094 – this was down 112 (9.3%) from the 1,207 recorded in June’s total but still 13.4% higher than the 741 recorded in July 2020.
While both totals are still below the 1,442 recorded in July 2019, a 24% reduction for 2021, it is the third consecutive month that year-on-year figures are higher than 12 months ago – indicating a broader recovery towards pre-pandemic levels.
112 cases is a relatively small number and combined with the residual effect of the summer holiday season and the general upward trend of cases we should expect this to begin to rise by October at the latest.
The reduction in monthly cases is the first since April and with creditor actions such as statutory demands and winding up petitions due to be reintroduced at the end of September along with the widely expected withdrawal of the furlough scheme and other support measures, it’s logical to speculate that insolvency rates will be a lot higher by the end of the year.
Of the 1,094 company insolvencies recorded in July in England and Wales there were 1,007 creditors voluntary liquidations (CVLs); 41 compulsory liquidations; 40 administrations and 6 company voluntary arrangements (CVAs). Once again, there were no receivership appointments in July.
Compulsory liquidations and administrations saw small rises from June – up three and one respectively, while there were 109 fewer CVLs and eight fewer CVAs.
The only category that isn’t lower than its 2019 equivalent are CVLs which are at the same level.
- Compulsory liquidations are 77% lower than July 2020 and 84% lower than July 2019
- CVLs are up 70% on July 2020 and the same for July 2019
- CVAs are 65% lower than July 2020 and 85% lower than for July 2019
- Administrations are 78% lower than a month ago and 73% lower than July 2019
There were 72 company insolvencies in Scotland last month comprising 14 compulsory liquidations; 54 CVLs and four administrations. Overall these figures were 36% higher than a year ago but 26% lower than in 2019.
Historically, compulsory liquidations have been the most common kind of insolvency registered in Scotland but since April 2020 there have been twice as many CVLs as compulsory liquidations. This has been the situation for 14 out of the preceding 15 months.
There were also 14 company insolvencies registered in Northern Ireland – 40% higher than in July 2020 but 33% lower than for July 2019.
This was made up of one compulsory liquidation, nine CVLs and an administration.
The overall total of UK company insolvencies for July 2021 is 1,180, an overall decrease of 115 from last month’s collective total.
“It will take longer for the worst hit sectors to recover from the pandemic”
Colin Haig, President of R3, the insolvency and restructuring trade body said: “The month on month fall in corporate insolvencies was as a result of a drop in compulsory liquidations, CVLs and CVAs.
“However, this is the third consecutive month in which year-on-year corporate insolvency levels have risen, which reflects the effect the pandemic has had on the business community.
“The 70.4% increase in CVLs this month compared to July 2020 suggests an increasing number of directors have decided to close their business after spending a year trying to survive the pandemic.
“Although government support has continued to provide a lifeline for many businesses which would otherwise have struggled in an economic climate like this, this July was still a challenging month.
“The delay in lifting the final restrictions will have hit trading, footfall and spending, and a huge number of firms have spent 15 months trading in conditions that are wildly different to normal.
“With the opening up of the economy, consumer confidence at pre-pandemic levels, and spending levels higher than they were in 2019 the future does look more optimistic. Having said that, it will take longer for the worst hit sectors to recover from the pandemic.
“SMEs are the backbone of the UK economy, but many have been badly affected by the pandemic. The restructuring community is better placed than ever to help them and other organisations with financial worries, but if directors leave it too late to ask for help, they will have fewer rescue or recovery options open to them.”
We couldn’t agree more.
One of the main advantages of getting in touch with us and arranging a free initial consultation is the earlier a director or business owner does it, the more options they will have available for their company.
Depending on their goals and ambitions for the business, either restructuring the business and its debts are appropriate or if there is no viable way forward in the immediate future then there are several efficient ways to close the business down instead.
No matter what direction you want to go in, there will be an insolvency procedure to achieve it but only if you get in touch.
Creditors will be allowed to begin recovery actions in only a few weeks so you can be sure they will be keen to exercise their options as soon as they can.
Make sure you use this time to exercise yours.