What are the other key statistics to pay attention to
We wrote last month about how the corporate insolvency figures were defying gravity and the latest update released by The Insolvency Service shows that expectations that this would continue have finally been brought back down to earth.
The total number of company insolvencies in March 2021 for England and Wales is up to 992.
This was a statistically significant rise of 44.5% compared to last month but when dealing with such relatively small numbers, any increase could statistically skew the figures.
We have to remember that the total of 686 recorded in February was the lowest recorded number of company insolvencies recorded since January 2019 and while the rise of can be seen as a return towards the mean, it’s still 20% lower than the 1,236 insolvencies registered in March 2020 and 37% lower than than the 1,586 recorded in March 2019.
The total number of 992 registered company insolvencies for England and Wales is made up of:-
- 25 Compulsory liquidations – down from 33 last month; 86% lower than 2020 and 90% lower than 2019
- 883 Creditor Voluntary Liquidations (CVLs) – up from 591 last month but still 3% lower than in 2020 and 23% lower than in 2019
- 10 Company Voluntary Arrangements (CVAs) – up from 6 last month but 44% lower than in 2020 and 66% lower than in 2019
- 74 Administrations – up from 56 last month but remains 44% lower than in 2020 and 58% lower than in 2019
Additionally, there were 43 company insolvencies in Scotland (11 compulsory liquidations, 27 CVLs, 4 administrations and 1 CVA) which is down 43% year on year and 56% lower than in March 2019.
There were also 7 in Northern Ireland (5 CVLs, 1 administration, 1 CVA) 77% lower than March 2020 and in March 2019.
This brings the overall UK total of 1,042.
The Insolvency Service continues to point out that the results are artificially depressed from the levels one would normally expect to see given the restricted trading conditions due to the various ongoing government support schemes and suspensions on creditor actions like statutory demands and winding-up petitions.
These restrictions are due to expire at the end of June 2021 and while they could be extended again, it is becoming increasingly likely that they won’t be.
“Support has postponed rather than prevented the true picture being show”
Christina Fitzgerald, Vice President of R3, the insolvency and restructuring trade body said: “The monthly rise in corporate insolvency numbers shown in the figures published this week has been driven by an increase in Creditor Voluntary Liquidations (CVLs) and administrations, while Company Voluntary Arrangements (CVAs) have also increased.
“The economic damage caused by the pandemic is starting to be reflected in levels of insolvency, but Government support has postponed rather than prevented the true picture being shown in insolvency levels to date.
“Twelve months ago, the economy was struck by the pandemic and it has yet to fully recover. The monthly rise in corporate insolvencies comes after 11 months of relatively low levels of company insolvency procedures, as the Government’s support has provided many businesses with a vital lifeline and removed many of the traditional prompts and triggers for seeking financial advice.
“As lockdown restrictions continue to unwind, there are reasons to be optimistic. Many businesses have adapted and reinvented themselves during the pandemic and may be in a better position for the coming months as a result.
“We may also see consumer spending increase, but companies need to be aware of the risks of over-trading if they don’t have the cash flow needed to cover the full costs of reopening and restocking. They need to plan for a sustainable reopening of their business.
“Unemployment is surprisingly higher than it was a year ago and while demand for workers in sectors gearing up for a return to pre-pandemic levels of work will offset some of the jobs lost in the companies worst-hit by Covid, it will take some time for economic and mental wellbeing to recover.”
We’re all familiar with the phrase “what goes up must come down” – but the inverse is also true when something is being held back.
What do you need to do next?
More companies with increasingly difficult financial issues are choosing to get advice on what steps they can take next to either restructure their business to be able to trade profitably again or to close their business efficiently and with a minimum of stress.
The earlier in the process a business gets advice, the more options they will be able to consider for their next move. This is why we offer a free, initial consultation for companies to plan their recovery strategy.
As corporate insolvencies continue to rise, so does the demand for effective insolvency solutions. The sooner you decide to make a plan for your company’s future, the sooner we can help you put it into practice.