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July stats 2021

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. 

Additionally:- 

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. 

June 2020 insolvency stats

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. 

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. 


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. 

HMRC

Specifically because the repayments from this and other Covid-19 support measures are coming due this year - if they haven’t already - and there is some confusion for businesses looking to close down about how seriously or not this outstanding debt is being treated. 

A recent example of the confusion is a letter that the Business Secretary Kwasi Kwarteng sent in a letter to business leaders this week. 

In the letter, he said that HMRC would take a “cautious approach” with companies that were trying to reopen post lockdown and pay down their debt appropriately. 

Specifically replying to concerns raised by R3, the insolvency trade body and the Institute of Directors that urged HMRC to help businesses in danger of becoming insolvent due to a combination of issues including:

Kwarteng wrote that HMRC would “adopt a cautious approach to enforcement of debt owed to government that will have accrued” and said that HMRC would soon update its enforcement methods so that any outstanding debt could be brought into managed arrangements for businesses affected by the pandemic and subsequent lockdowns. 

He said that using insolvency to enforce payment would remain a last resort and that he recognised that “the path back to full trading will be difficult for many companies, particularly those with accrued debt and low cash reserves.”


Does your business need to worry about bounce back loan fraud?


This is in contrast to news published by The Insolvency Service in the same week highlighting their success in petitioning courts to wind up five limited companies since this year that had been involved in fraudulent activity involving bounce back loans and CBILS borrowing. 

Dave Elliott, Chief Investigator at the Insolvency Service said: “The bounce back loan scheme was made available to help support businesses during the pandemic. 

“It’s outrageous that some directors have been trying to abuse this support, and the action we have taken shows we take this issue extremely seriously.”

The new Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill, currently before Parliament, will give the Insolvency Service additional powers to investigate and disqualify directors of companies which fraudulently claimed bounce back loans but were then subsequently dissolved. 

The investigative power will be retrospective to look at conduct that took place before the law came into place and if wrongdoing or malpractice is found, the sanctions can include a ban of up to 15 years or even criminal prosecution for serious offences uncovered. 

Chris Horner, Insolvency Director with Business Rescue Expert, thinks that while it’s useful for HMRC and the Insolvency Service to remind directors and business owners about their responsibilities, the mixed messaging might cause unnecessary confusion.

He said: “From the conversations we’ve been having within the industry and examples we’ve seen it’s apparent that the Insolvency Service are directly targeting abuse of the bounce back loan scheme, CBILS and furlough fraud as their highest priority this summer.  

“They will specifically be looking at businesses with bounce back loans who have tried to use the route of dissolution or striking off to close their business down instead of using a more appropriate liquidation procedure

“In these circumstances it wouldn’t be surprising to see them seeking compensation orders to make directors personally liable for these debts if they have closed their business incorrectly in the eyes of the Insolvency Service. 

“Recovery action on defaulted payments will be pursued for at least 12 months as standard and even though lenders will be repaid under government guarantee for bounce back loans for example, they are still required to continue any recovery action. 

“They will probably avoid initiating insolvency proceedings just for bounce back loan debt by itself but will continue with debt collection measures including using debt collectors or bailiffs. 

“We can also clarify that any personal guarantees given against bounce back loan debt specifically are unenforceable and these debts cannot be sold on to other collectors. They will remain the responsibility of the original lender to collect. 

“Another thing bounce back loan borrowers need to remember is that even if they have obtained a payment holiday from their first repayments, interest continues to accrue during the payment holiday.  

“If a business with bounce back loan borrowing is contemplating liquidation, which it can do, it will be treated like any other creditor and should not be paid over and above agreed repayment terms. 

“This also includes if the funds are being held as cash in their bank account. They should not use this to repay the lender ahead of other creditors as in the event of insolvency it would be treated as a preferential payment.”

If your business has taken out a bounce back loan or CBILS borrowing in the past 18 months and you’re worried about repayments or if you think your best option is to close your company but don’t know how to deal with these specific debts then get in touch with us today.

We offer a free initial consultation for business owners and directors to discuss their situation and we’ll work with them to come up with the most efficient and effective plan to reach their goals. 

As it continues to be a challenging environment for companies and will remain so for the rest of the year and possibly beyond, so taking the time to fix any financial difficulties facing your business right now could be the best time investment you make in 2021.   

May 2021 insolvency stats
 
The number of corporate insolvencies across the UK has also risen slightly in the latest official monthly company insolvency statistics released by The Insolvency Service
 
For England and Wales, the total number of corporate insolvencies for May was 1,011.
 
This is an 8.8% rise on the 925 recorded in April and is 7% higher than the 946 recorded in May last year but still 25% down on the 1,352 recorded in May 2019.   
 
There’s a sense of Deja Vu about this set of statistics. 
 
Back in December, we saw a rise in insolvencies that also accompanied a rise in general spending just before the Christmas season (although not as much as a traditional one).
 
We then had another third lockdown and by January the number of insolvencies had collapsed again. 
 
So right now we are seeing increased consumer spending at exactly the same time that lockdown restrictions are being extended for at least the next four weeks which would indicate that it would be surprising to see figures increase next month.
 
The caveat to this is that while the lockdown is continuing, support measures are not. 
 
The temporary ban on creditor actions such as  statutory demands and winding-up petitions is being lifted at the end of June along with a halt on commercial evictions by landlords and employers will also be paying more towards staff furloughs before the CJRS finally winds up in September. 
 
All of which means that the trending direction of next month’s figures will be as intriguing as the numbers themselves.
 
The 1,011 company insolvencies in England and Wales consisted of 930 creditor voluntary liquidations (CVLs), 31 compulsory liquidations, 43 administrations and 6 company voluntary arrangements (CVAs). 
 
In comparison to the data for the same month from the previous two years, we see how depressed the numbers are right now. 
 

 
Additionally, there were 51 company insolvencies in Scotland (made up of 8 compulsory liquidations, 37 CVLs, 5 administrations and one CVA) which was 46% higher year on year but 35% lower than in May 2019. 
 
Interestingly, Scottish company insolvencies tended to be led by compulsory liquidations but since the beginning of lockdown in March 2020, company voluntary liquidations have been the highest type of insolvency procedure in 12 out of the 14 subsequent months. 
 
There were also 7 company insolvencies registered in Northern Ireland (made up of one compulsory liquidation and 6 CVLs). This is a rise of two from last month and while 40% higher than May 2020, is 83% lower than the same period two years ago. As a note of caution, when dealing with such relatively low totals, any changes produce high percentage changes rather than being statistically significant in themselves.
 
The overall UK total of company insolvencies for May 2021 is 1,069, an overall increase of 101 from last month’s collective total. 
 


 
“Support has held off rather than halted the economic damage”
 
Duncan Swift, Immediate Past President of R3, the insolvency and restructuring trade body said: “Today’s increase in corporate insolvencies has been driven by a rise in creditors voluntary liquidations, while administrations have fallen to their lowest number since the start of the pandemic. 
 
“While it’s too early to say whether the mild increase in corporate insolvency numbers is the start of something bigger, times remain tough for businesses in the UK. 
 
“Government support has held off rather than halted the economic damage of the pandemic, preventing a serious rise in insolvency levels, but many business owners are now having to look ahead to how they’ll cope when these measures are withdrawn in the weeks and months ahead. 
 
“Business owners will be feeling increasing concern at the prospect of another delay to the easing of the lockdown in England and although the economy continues to grow, there’s still a lot of ground to make up to fully recover from the unprecedented economic contraction in April 2021. 
 
“Consumer spending has increased but it’s still below 2019 levels and while consumer confidence is improving, people are still worried about the future of the economy.”
 
From investment fund AI algorithms all the way to Mystic Meg, predicting the future is an uncertain science, especially when the variables keep changing. 
 
Restaurants, pubs, bars and other hospitality businesses who gambled on reopening at the end of the month will already be feeling the effects of the wrong call - even though it’s through no fault of their own. 
 
Most other business owners will understandably be nervous about what the next few weeks will hold because all restrictions were absolutely, positively going to be lifted on June 21st until suddenly they weren’t.   
 
With bounce back loans coming due and other support measures ending in a matter of days, getting professional advice on what options are available for directors and business owners should be one of the top priorities in the time remaining. 
 
We offer a free initial consultation where we can learn about what your immediate challenges are and provide you with effective and efficient options you can implement - right now - to help you revive, rescue or begin to restructure your business so you’ll be in the best position when restrictions end for everyone - whenever that is. 

pre pack sales
 
We’ve previously written that the government was bringing in new changes to the law surrounding pre-pack administration earlier this month. 
 
After debate in the House of Commons and the House of Lords this week, the changes to the legislation were duly passed by parliament and will formally come into force on April 30th 2021. 


 

What is Pre-Pack administration?

 


 
While we always approve of any efforts to improve and strengthen the insolvency and restructuring process, it will be interesting to see how the role of the evaluator in the pre-pack process will play out in actual cases. 
 
Some pre-pack administrations involve the sales of a distressed business to “connected parties”. These are individuals with some previous connection to the business - and can include previous directors or management who want to buy the company and run it themselves. 
 
In an effort to improve stakeholders' confidence in this process, one of the legal changes was to have every sale involving a connected party overseen by an independent evaluator.
 
But there’s some concern within our industry about the status and qualifications of the evaluators. 
 
Colin Haig, President of R3, the insolvency and restructuring trade group said: “We welcome efforts to improve stakeholder confidence in pre-packs, but it may be proved that this legislation has missed the mark. 
 
“Sales to connected parties in pre-pack administrations will now be subject to creditor approval, or review by the new independent Evaluator position. 
 
“The rationale for this is clear but the practicalities around ensuring that an Evaluator is a fit and proper person is where the regulations could fall down. 
 
“These regulations effectively leave it to the market to regulate the Evaluator position. A far better alternative would have been for the Government to agree to maintain a list of approved Evaluators. 
 
“This might have meant an additional administrative burden for them, but it would have given stakeholders greater confidence that these reforms were robust rather than just the easiest option for the Government.”
 
Some of the speakers in the parliamentary debate raised concerns about the prospect of “opinion-shopping” when it comes to evaluators - only appointing one that happens to agree with your valuation or choice of buyer. 
 
One of the speakers in the debate, Lord Foulkes of Cumnock, said: “As others have done, I also want to ask about the Evaluators, who will be given significant responsibilities. 
 
“It would be helpful to know what qualifications will be required to act as an Evaluator and will the Government consider a register of approved Evaluators maintained by the Insolvency Service?”
 
The Insolvency Minister Lord Callanan didn’t agree to any changes in the legislation but said that the Government may revisit banning connected party pre-pack sales or further reforms if the regulations prove not to be working as intended. 
 


 

We answer directors questions on pre-pack administration

 


 
Chris Horner, Insolvency Director with Business Rescue Expert, reiterates our position. 
 
He said: “Getting an Evaluator, who will act as a qualified valuer, to report on any sale and putting their professional opinion, with any supporting evidence, in writing provides transparency and clarity to any administration sale.
 
“We have always used professional third parties to provide their opinion on transactions we have initiated or overseen so it’s encouraging that our approach has been codified into law as legal best practice.
 
“Further cementing trust in our industry and our procedures will be paramount in future as government financial support for businesses is withdrawn and more will be seeking professional insolvency advice and help as they decide what direction they can take their business as a result.” 
 


 
If 2020 was a Year of Lockdowns then 2021 could well be a year of challenge and change. 
 
As more businesses begin to reopen, free from previous restrictions, they might re-emerge into a new, unfamiliar world.  
 
We don’t know how customers will react without restrictions and how many behaviours adopted in lockdown such as online shopping, dining in and expanded home deliveries will become permanent and replace old patterns that these companies relied upon. 
 
What we do know is that we will be there to offer our comprehensive professional advice and support to any business owner or director who needs it. 
 
A free initial consultation with one of our expert advisors will be the first step in a comprehensive recovery plan or pivot to give a company every chance of trading successfully in our new environment. 
 
Get in touch today so you can start making the decisions and changes you need to before it becomes too far down the line to change the destination. 

Jan 2021 Insolvency Stats

Insolvency statistics are a curious thing. 

The Insolvency Service does a fantastic job in providing regular, reliable and comprehensive statistics. 

They give us the clearest indication of precisely what is happening in every UK country regarding company insolvencies. The downside is that they are necessarily time-lagged so by the time the official figures for a certain month are released, we’re three weeks into the new month and already looking ahead. 

So it is with the first official statistics for January. These are important because they give us the first official snapshot of 2021 and what this could tell us about the underlying strength of the UK economy and the health of the thousands of businesses that make it up. 

The last monthly statistics release we covered for December showed a rise in the total number of company insolvencies which indicated that after a year of historic lows, perhaps cases were getting back to the numbers one would expect given the series of challenges businesses are having to overcome to stay afloat.  

Well, the opposite has happened - they fell by over half. 

The overall number of company insolvencies in January 2021 for England and Wales was 752, down from 1,228 in December 2020 and down by just over 50% for January 2020 which saw 1,515 cases registered. 

We now know that December 2020 was the only month since the start of the first UK lockdown in March where company insolvencies were higher than in the same month of the previous year. 

But compared to January 2020, the figures from last month are striking:-

Additionally there were 23 company insolvencies in Scotland (12 compulsory liquidations, 11 CVLs) and 3 in Northern Ireland (2 compulsory liquidations, 1 CVL) making a total of 778.

The Insolvency Service reiterates that as a result of pandemic itself and various Government support schemes including the Corporate Insolvency and Governance Act 2020 including the ongoing suspension of statutory demands and winding-up petitions, would have a strong influence on the numbers.

However none of these entirely solve the mystery of why corporate insolvencies rose in December yet fell away again dramatically in January. 

Colin Haig, President of R3, the insolvency and restructuring trade body might have an explanation.

He said: “Many firms are still struggling - and those who usually rely on a strong pre-Christmas trading period will have suffered as the third lockdown meant people couldn’t shop as they have traditionally. i

“It’s possible that a number of businesses entered an insolvency procedure ahead of the December rent quarter day, which would help explain why corporate insolvencies - and more specifically administrations and CVLs - increased then and fell again in January. 

“January’s fall in corporate insolvency numbers is primarily driven by falls in CVLs, CVAs and administrations. 

“These figures don’t reflect the fact that the economic fallout from the pandemic is continuing to hit businesses, individuals and the wider economy. It’s clear the Government’s support packages - which were extended again in December - are helping prevent the rise in insolvency numbers we would have expected to see in an economic climate like this one.

“However, the support packages and bans on creditor enforcement actions can’t last forever. 

“We hope that the Chancellor will use his budget on March 3rd to outline how they will be wound down in an orderly manner in the medium term, and how businesses, staff and the self-employed will be supported during this period.

“Our members are telling us that companies are hesitant to make plans with conditions liable to change at any moment, so clarity around the future of the support schemes will help directors with their planning for the rest of the year. 

“The debt burden which UK companies, especially SMEs, have built up is also a concern, as it will drag down the investment which will be a vital component of the economic recovery from the recession.” 

Colin Haig’s description makes sense when you consider that entering an insolvency moratorium itself or other insolvency procedure that grants a similar protection such as a CVA. 

It gives a company at least ten working days’ protection from creditors’ demands and actions while they work with a professional insolvency practitioner to see how they can make the business stronger and more resilient. 

If you feel that your business could benefit from some professional, impartial advice then get in touch with us to arrange a free, virtual consultation.

We can help you make sure that your company is in the best position to take advantage because these legal and commercial conditions won’t last forever. 

That’s one thing we can all be certain off.

Thelma and Louise

SPOILER - it’s the end when, pursued by the police, the two heroines decide to drive off the cliff together rather than be caught by the police. 

So when any cliff-edge scenario appears, it’s now shorthand to call it a “Thelma and Louise” situation. 

We mention this because amidst all the confusion and worry about pandemic restrictions being tightened even further along with the accompanying economic consequences, there’s a cliff edge approaching businesses in 86 days time.

Actually more than one:-

March 31st Deadlines

April 30th Deadline

With the third national lockdown announced this week, the government has also unveiled additional financial support in the form of one-off grants for retail, hospitality and leisure businesses. 

There is also additional funding for local authorities and devolved administrations to support businesses affected by the restrictions that are not eligible for these grants. 

Regardless of these temporary support measures, the ultimate end date is quickly approaching for all of the Covid-19 financial support measures. 

As well as creditors being able to issue statutory demands for payment and winding-up petitions to enforce them again, landlords will also be able to begin eviction proceedings against their commercial tenants for non-payment of rent. 

Not only that but HMRC will be demanding repayment of any outstanding VAT amounts for 2020 that were deferred until this date as well as the VAT rate for businesses. 

A month later sees the final end of the Coronavirus Job Retention Scheme/Furlough as well as the return of personal responsibility for wrongful trading

The Bounce Back Loan (BBL) scheme and Coronavirus Business Interruption Loan Scheme (CBILS) have, to date, supplied over 1.5 million companies with over £63 billion of money to stay afloat which was a measure of their success but the amounts borrowed have to be repaid, regardless of whether the borrower’s business has recovered enough to afford them. 

A lot of businesses are on life support at the moment. 

As we’ve previously written, Novembers company insolvencies was down 41% year on year while the number of companies entering administration was down 51%. 

But experts fear this is merely forstalling the inevitable. 

Colin Haig, president of R3, the trade body for the insolvency and restructuring industry said: 

“We simply don’t know what the impact of additional tiers, lockdowns and the developing virus situation will be on insolvency numbers. 

“However, we’re quite sure that it’s still a question of when, not if, in 2021 there will be the uptick in insolvencies we are expecting.”


Thelma and Louise is fiction. Entertaining but still fiction. Which is why suggesting they pump the brakes, turn around and live to fight another day might be sensible advice but boring cinema.  

Running your business, paying your bills and staff and trying to trade in the most onerous circumstances for nearly a century is reality. So doing the sensible thing and getting expert help before problems become emergencies is the right decision. 

Get in touch with us to arrange a free, virtual consultation with us at the most convenient time for you. 

We can begin to work with you on the issues you’re facing and give our expert view on what can be done to solve them. Right now is one of the best times in years to get advice and help thanks to some of the tools available to insolvency professionals

Once we all get through these latest restrictions on our lives and businesses, then you could be in the perfect place to enjoy the benefits from people going out and spending again. 

Including popcorn back at the movies!

Nov stats

In November there were a total of 889 company insolvencies in England and Wales with an additional 46 in Scotland and 7 in Northern Ireland which is a UK total of 942 - a small rise on the 856 total for October.

The small uptick is likely due to insolvencies already arranged for the end of furlough, before it was extended at the 11th hour.

The 889 case total is made up of 767 Creditors Voluntary Liquidations (CVLs); 34 compulsory liquidations; 73 administrations and 15 Company Voluntary Arrangements (CVAs). 

It is still 41% down on the same month in 2019 but with good and demonstrable reasons for it. CVLs have fallen by 28% year on year and compulsory liquidations are down a massive 88%. 

CVAs are down 29% and administrations have fallen by more than half to 51%. 

We’ve written about this before, detailing how all types of company insolvencies have fallen in consecutive quarters this year and this trend continues into Q4 although the figures did uptick slightly on last month.  

Company Voluntary Liquidations (CVLs) are far and away the most common insolvency process accounting for nearly three quarters of all procedures. 

The continuing relatively small number of both CVAs and administrations considering we are in a historic economic situation might still surprise at first glance but a straightforward explanation exists.  

Firstly, financial support available to companies during the pandemic has been extended into March and April 2021 which is a welcome development, it also means that some businesses still function that would otherwise either be in insolvency or closed. 

Additionally, the continuing suspension of statutory demands and winding-up petitions until makes it virtually impossible for creditors to take any enforcement action, along with the fact that the courts are running on a skeleton system.

They won’t be able to offer a full and functioning service until Spring at the earliest as they’re having to deal with both an increasing backlog and what will be a flood of new demands once the temporary suspension on enforcement measures is lifted. 

“Many companies will face a cold start to 2021”

Colin Haig, President of R3 - the insolvency and restructuring trade association, said: “The increase in corporate insolvency numbers in November has been driven primarily by a rise in CVLs although CVAs, administrations and compulsory liquidations all fell compared to the previous month. 

“Despite the small monthly increase in overall corporate insolvencies, the statistics are not an accurate reflection of the state of the economy or the state of the UK business community. 

“WIthout the extensive support the Government has provided we’d be in a very different situation - and a very grave one at that. The economy is still nearly 8% smaller than it was in February, unemployment has increased and a number of big brands have entered insolvency processes or announced restructuring programmes in recent weeks. 

“A good festive trading period has never been more important, but the impact of repeated stop-start closures in many sectors, and the disruption to usual pre-Christmas activities and events mean that many companies will face a cold start to 2021.”

Anybody who has tried to start a car after it's been left standing for an extended period understands the risks. 

If you’re lucky it can restart with a minimum of cajoling and assistance but others will need specialist help to get them turning over and working well again. 

In the worst case scenarios, you might have left it too late to get help and the only thing you can do is look at expensive new parts. 

It’s the same with a business that is struggling going into this crucial winter trading period. If you’re lucky enough to be in a sector that lets you trade that is. 

With so much economic uncertainty still ahead of us, businesses that act now to make sure they are doing everything they can to support and protect their livelihoods will have a significant advantage over those who don’t or leave it until things really are too late for them. 

You can get in touch with us right now to arrange your free initial consultation.

It can be done virtually at a convenient time and date for you and we can talk through what’s worrying you and how you can start to prepare for a better future for your business in 2021.

HMRC Crown Preference
 
Now this doesn’t refer to the order in which Her Majesty likes cream and jam put on her scones (that’s the correct order btw), but relates to the order in which creditors are paid in insolvencies, specifically where HMRC come in the list.
 
With the new Finance bill passing, there was a small but important change made to creditor preference which restores HMRC’s standing to be classed as a preferential creditor from 1st December 2020.
 
This means that after this date any outstanding tax or NIC debt will be paid before floating charge providers such as banks, lenders or suppliers can get any money from the administrators. 
 
The new legislation has moved HMRC up the queue which will have ramifications for companies considering or going into insolvency. 
 
R3, the trade body for the insolvency and business restructuring industry have always been firmly against the move. 
 
Duncan Swift, R3’s past president said: “HMRC’s increased payment from insolvencies has to come from somewhere - and it will come from what’s owed to an insolvent business’s other creditors. 
 
“Now these creditors will only receive a return once HMRC has been paid in full, it will be much harder to secure their support for rescue plans.
 
“It’s ironic that this measure, which is being brought in to try and boost the tax take, is likely to reduce the amount of tax collected, as potentially viable companies are not able to be rescued and are forced to close, while growing businesses are less able to tap into the funding they need to invest and expand.”
 
The last time HMRC enjoyed this status was in 2002 but it was downgraded as part of the Enterprise Act of the same year. 
 
Chris Horner, Insolvency Director with Business Rescue Expert which has helped many companies manage their HMRC arrears also thinks there will be unintended consequences arising from the move. 
 
“One thing that could immediately affect all businesses, not just those in insolvency or that owe money already to HMRC, could be the access to finance. 
 
“Floating charge finance - that’s funds borrowed against assets like stock or work-in-progress - will now come below HMRC from December. 
 
“That means that this useful and easily accessible type of finance will probably become more expensive and harder to obtain as lenders look to protect themselves from expensive liabilities. 
 
“For some businesses, this might be the difference between survival and liquidation.”
 
More companies owe money to HMRC than any other creditor in the UK and the change in legislation will see them becoming more confident and aggressive in looking to reclaim outstanding debts with the additional leverage being given to them. 
 
If you are behind on any payments then you should get in touch with us today. 
 
There are several proven strategies and approaches we can help with and use in order to come to a payment arrangement with HMRC. Each can allow a business to continue trading while catching up with their debts but only if they’re executed quickly and properly by professional insolvency practitioners like us. 
 
If the coronavirus pandemic of 2020 hasn’t been enough of a big dipper for businesses, the return of HMRC preference will guarantee an unpleasant end-of-year surprise for several companies - don’t allow yourself to be one of them. 

Rule Changes
 
 
 
 
 
This will officially bring in a moratorium or “breathing space” that lawfully gives companies time to explore options for rescue and restructure. 
 
The other big news was that the current rules on wrongful trading are to be suspended
 
The current rules state that directors of limited liability companies can become personally liable for business debts if they continue to trade when uncertain whether their company’s can meet their debts. 
 
Their rationale is that if these rules are relaxed then directors will be reassured that decisions they have to make now about the future viability of their businesses won’t be unduly influenced by the exceptional circumstances beyond their control they find their businesses in. 
 
The new rules, which they plan to legislate through parliament at the earliest available opportunity, will include:
 

 
The existing laws for fraudulent trading and subsequent director disqualification will remain to continue to act as an effective deterrent against director misconduct. 
 
Chris Horner, Insolvency Director with Business Rescue Expert said: “These new rules are not a get-out-of-jail-free card.
 
“We’re in favour of support to companies in straitened circumstances if it helps us in our work of rescuing them and putting them on a sounder footing, but there are limits. 
 
“The rules on preferential payments and transactions at undervalue will still apply and wrongful trading will still apply if the business had already reached the point of no return prior to March 2020. It therefore remains important to take advice if you still expect solvency issues, regardless of the government assistance.”
 
Duncan Swift, President of R3, the insolvency and restructuring trade body said: “We’re hopeful the government will address many of the concerns our members have expressed about the reforms. 
 
“For example, the moratorium won’t be useful if it can’t be accessed by all insolvent companies, so while they work on the details they should listen to creditors and landlords about how they will be affected by it. 
 
“Our members will continue to use the wide range of tools at their disposal to help restructure businesses and rescue jobs but there are some serious concerns about the plans to suspend wrongful trading. 
 
“A blanket suspension risks abuse. The provisions are there for a reason and protect creditors. 
 
“We understand that directors may be worried about consequences if they’re already missing debt payments but good advice from an insolvency practitioner will remove any risk of facing a wrongful trading action.”
 
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None of us have lived through a situation similar to this - unless you survived the Spanish Flu in which case stay extra safe. 
 
While it’s true that some laws are being tweaked, the fundamentals remain the same and if you’re already at risk of or actually trading while insolvent then you need some qualified, experienced help and advice right now. 
 
Contact us and we can arrange a free, virtual, initial consultation with one of our expert advisors at a convenient time for you. 
 
We can get an understanding of your company and the situation you face and come up with a clear roadmap to work through. 
 

Business Rescue Expert is part of Robson Scott Associates Limited, a limited company registered in England and Wales No. 05331812, a leading independent insolvency practice, specialising in business rescue advice. The company holds professional indemnity insurance and complies with the EU Services Directive. Christopher Horner (IP no 16150) is licenced by the Insolvency Practitioners Association

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