In Focus Collections Failure query


High levels of corporate insolvencies appear to contrast with confidence and economic figures


Colin Haig President, R3


There were 3,116 seasonally adjusted corporate insolvencies in Q2 2021, an increase of 31.4% compared to Q1 2021's figures of 2,371 and a rise of 4% compared to Q2 2021 (2,997). There were 27,622 seasonally adjusted


individual insolvencies in Q2 2021, a fall of 4.3% compared to Q1 2021's figures of 28,895 and a fall of 13.9% compared to Q2 2021 (32,134).


Corporate insolvency The increase in corporate insolvencies – to the highest quarterly total in 18 months – has been driven by a rise in Creditors’ Voluntary Liquidations (CVL), which have increased to pre-pandemic levels. It is hard to say what is driving this


increase in CVLs, but it could be that directors of a number of companies have decided they can no longer go on trading as a result of the pandemic, and are opting to close down their businesses by using the CVL process, before the situation deteriorates further. What is clear is that the figures published


today show the toll the challenges of the last three months – and the 12 before them – have taken on the business community. While many business owners were


hoping the lifting of the lockdown would help them, they reopened amid low consumer confidence, a time when people were being encouraged to stay local, and when the economy was still a long way from recovering from the blow the start of the pandemic dealt it. The formal end of lockdown may have improved their situation, but it was not the boost many businesses had hoped for.


August 2021 However, the government’s support


measures have remained in place over this period and are likely the reason why today’s increase is not as severe as it could have been. This support has been a lifeline for many businesses, but with the end of furlough in sight, directors now need to take the time to plan for how they will manage when this initiative ends.


Individual Voluntary Arrangements and Bankruptcies, although it is worth noting that Debt Relief Order numbers have increased. This could well be a sign that the


Breathing Space Scheme, which was introduced in May of this year, is delaying people from having to enter a personal insolvency process when they previously would have, by giving them time free from creditor action so they can consider their options and seek debt advice. With 11,747 people making use of the


What is clear is that the figures published today show the toll the challenges of the last three months – and the 12 before them – have taken on the business community


Looking ahead to the next quarter, the


picture appears to be more positive. The economy is continuing to recover – the IMF has predicted it will grow by 7% this year, consumer spending is now above 2019 levels, and people are more optimistic about their personal finances. With the removal of the final COVID


restrictions and the vaccine rollout continuing, there is a chance many businesses may be able to return to near-normality again – although some sectors will take longer to get to this point.


Personal insolvency The decrease in personal insolvencies has been driven by a fall in numbers of


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Breathing Space up until 30 June, there is clearly a significant demand for this scheme, but whether this prevents more people from entering a personal insolvency process or delays their entry into one is too early to tell. Despite the fall in personal insolvencies,


the last three months have been challenging for consumers, as the delay in lifting the final stages of lockdown have affected people’s return to work – or in some cases, return to full-time work. Government support has helped many


through this period, with the furlough scheme enabling millions to avoid unemployment, but it has not been able to help everyone and has meant people have had their incomes reduced as a result of being furloughed. And, although the pandemic has meant a


number of people have been able to save money, it has meant others, typically those on lower incomes, have had to borrow or use their savings. People in this situation are typically one unexpected issue, such as a reduction in hours at work or a sudden bill, away from insolvency. CCR


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