What do the monthly statistics tell us?
For England and Wales, the total number of corporate insolvencies for June was 1,207 – up 196 from the 1,011 recorded in May – a rise of 16%.
By way of comparison to the same period 12 months ago – these figures are 63% higher than June 2020 but remain 18% lower than a pre-pandemic June 2019.
The upward trend is the first consecutive monthly rise since October and November 2020. Those figures might have been expected to climb for a third month in a row if it hadn’t been for the third lockdown initiated in December 2020.
Although compulsory safety measures such as mask wearing and social distancing have been discontinued since July 19th, the number of Covid-19 cases continues to rise across the country at levels greater in some areas than last Autumn which directly preceded another lockdown.
With support measures due to be fully withdrawn at the end of September and creditor actions such as statutory demands and winding-up petitions being reintroduced at the same time, insolvency statistics could begin to rise at a faster rate from October onwards.
The 1,207 company insolvencies in England and Wales consisted of 1,116 creditors voluntary liquidations (CVLs); 38 compulsory liquidations; 39 administrations and 14 company voluntary arrangements (CVAs). There were no receivership appointments in June.
The only category that saw an increase on the previous month are creditor voluntary liquidations which are up by half and while CVAs have remained at the same number, administrations and compulsory liquidations had both fallen.
CVLs are the only insolvency category that was higher than its pre-pandemic equivalent, at their highest recorded level since March 2019, with the rest down 60% or greater.
- Compulsory liquidations are 46% lower than June 2020 and 86% lower than June 2019.
- CVLs are up 50% on June 2020 and are 11% higher than June 2019.
- CVAs are at the same level as in June 2020 and down 60% on 2019
- Administrations were 61% lower than 2020 and 74% lower than June 2019
Additionally, there were 77 company insolvencies in Scotland comprising 14 compulsory liquidations, 62 CVLs and one administration which was 67% higher year on year and 13% higher than in June 2019.
This was the highest number of monthly insolvencies recorded since February 2020.
Scottish company insolvencies tend to be driven by compulsory liquidations but since the advent of the first Covid-19 lockdown in March 2020, there have been nearly twice as many CVLs as compulsory liquidations – being the most frequent type of insolvency for 13 out of 14 months.
There were also 11 company insolvencies registered in Northern Ireland – 22% higher than in June 2020 but 62% lower than June 2019.
This was made up of one compulsory liquidation, nine CVLs and one administration.
The overall total of UK-wide company insolvencies for June 2021 is 1,295, an overall increase of 226 from last month’s collective total.
“Uneconomic to continue trading”
Christina Fitzgerald, Vice President of R3, the insolvency and restructuring trade body said: “The increase in corporate insolvencies between between May and June – to the third highest monthly figure since the pandemic started – has been driven by a rise in Creditors’ Voluntary Liquidations (CVLs).
“The Government’s decision to delay lifting the final Covid-19 restrictions for another month has clearly been a further blow to the business community and may have been particularly unhelpful for the hospitality and retail sectors, which have been hit hardest by trading restrictions and lockdowns.
“It may be that this impact has been reflected in June’s statistics as the rise in CVLs, used by directors to voluntarily close a company, suggests that for many directors the delay to the removal of the restrictions may have simply made it uneconomic to continue trading.
“However, we are heartened by the Business Secretary’s recent comments on HMRC’s planned approach to working with distressed businesses. In particular, the news that HMRC will take a supportive approach to rescue proposals from viable businesses is welcome, and we hope will support the profession’s efforts to support Covid-19 hit firms.
What can businesses do now?
Summer is usually the time when people are looking at holidays and taking it easy so businesses will either be enjoying their slowest or busiest periods of the year depending on their location or industry.
This year has once again proved that normal service is a long way from being resumed.
The one thing we can say with absolute certainty is that the specialist advice is as good an investment of time right now as anything.
Whether it’s looking at making slight corrections to make a company more efficient and streamlined when demand picks up after the heatwave and home holidays dissipate, or looking at bigger restructuring or more drastic but necessary action – expert guidance is available here and now.
We offer a free initial consultation where we can learn more about your immediate challenges and provide you with a range of effective and efficient options that can be implemented to help any business get back on the right track.