The Analysis Comment
Feeling the economic impact of Covid
Monthly corporate and individual insolvency statistics show the impact of the virus for the first time
Colin Haig President, R3
Figures show that corporate insolvencies increased by 37.8% to 1,228 in December 2020 compared to November’s figure of 891, and were 9.2% higher than December 2019’s figure of 1,125. Meanwhile,
personal insolvencies
increased by 2% to 9,518 in December 2020 compared to November’s figure of 9,328, and were 13.4% higher than December 2019's figure of 8,391.
Administrations December’s increase in corporate insolvency numbers has been driven by a rise in administrations and Creditors’ Voluntary Liquidations. It is the first time since February 2020 that the monthly corporate insolvency figures are higher than in the same month the previous year. Personal insolvency numbers grew slightly
between November and December, due to a rise in Individual Voluntary Arrangements, although numbers of bankruptcies and Debt Relief Orders were lower in December than in the previous month. The rise in personal insolvencies compared
with the same month in 2019 was entirely down to IVAs, as numbers of bankruptcies and DROs fell by over a third in December 2020 compared to December 2019.
Economic impact These figures show that the economic impact of the pandemic may now finally be pushing increasing numbers of struggling businesses and individuals over the line into formal insolvency. It is a question of when, not if, insolvency numbers further increase
this year – especially as the government’s support packages, which have provided a critical safety net for businesses and individuals, are due to start running out at the end of the first quarter. Even if the Chancellor decides to extend them again, at some point they will have to come to an end.
February 2021
Devastating COVID-19 has had a devastating impact on the UK’s economy, which fell by 8.9% in the 12 months to November 2020, and on unemployment levels, which have increased at the sharpest rate for a decade. We have also seen a number of big brands
– including household names – enter insolvency processes or announce restructuring programmes as their operations were hampered. While it is too early to judge the impact of
The rise in personal insolvencies compared with the same month in 2019 was entirely down to IVAs, as numbers of bankruptcies and DROs fell by over a third in December 2020 compared to December 2019
the latest lockdown on businesses, it has further complicated an already muddy economic picture, and will likely have been an additional blow for firms which traditionally depend on a busy festive period. Even if the economic impact of the
introduction of stricter lockdown measures is not as dramatic as it was during the early stages of the pandemic, it will be serious, and businesses will also start to feel the effects of the change in the UK’s relationship with the EU – though it is unlikely that this will affect insolvency numbers in the short term.
Consumer confidence Individuals have been affected as well. While consumer confidence has improved over the
last three months, it is still much lower than it was this time last year, understandably. Although a number of people in the UK have saved money and
repaid debts during the pandemic, others who have not been able to are struggling. A lot of people are worried about their finances and their financial future, as well as the current and future health of the economy. As soon as signs of financial trouble surface, whether in your own
or your business’s finances, it is time to seek advice from a qualified and reputable source. Doing so will allow more options to resolve your situation, and more time to take a considered decision about potential solutions. CCR
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