The Analysis Comment
Response to July corporate and personal insolvency figures
Figures reveal the extend of current difficulties, but also point to a hard road ahead
Colin Haig President, R3
Corporate insolvencies in England and Wales increased by 29% when compared to June 2020 but are 34% lower than in July 2019. Personal insolvency numbers in England
and Wales decreased when compared to June 2020 (12% lower) and July 2019 (40% lower). The month-on-month rise in corporate
insolvencies in July is largely down to an increase in administrations, Compulsory Liquidations, and Creditors’ Voluntary Liquidations (CVL). Although overall numbers remain low in comparison to the same time last year, this uptick could suggest that the pandemic might now be starting to be seen in the insolvency figures.
Personal insolvency On the personal insolvency side, the recent decrease has been driven by a reduction in the number of Debt Relief Orders (DRO), and Individual Voluntary Arrangements (IVA). Bankruptcies have increased slightly, due to a small rise in the number of debtor applications, but they are still well below pre-pandemic levels.
begin to seek support from an insolvency and restructuring professional, as a result of the impact of the pandemic
It may not be long before companies which would be viable under normal
circumstances It is important to note that although these
statistics suggest the pandemic is starting to affect corporate insolvency levels, govern- ment’s continued support for firms and con- sumers means that we are not much nearer to understanding how COVID-19 is truly affecting underlying corporate or individual distress than we were last month. However, all the signs point to a tough road
ahead. The UK has entered a recession, consumer confidence is low, and a number of big-name brands have recently announced they are exploring or have entered insolvency or restructuring procedures.
Business climate This suggests the business climate will be challenging in the foreseeable future – and will not be made any easier as the government support packages begin to wind down. Our members are telling us that it may
not be long before companies which would be viable under normal circumstances begin to seek support from an insolvency and restructuring professional, as a result of the impact of the pandemic. This may lead to an increase in requests
for personal insolvency support if people lose their jobs or agree to take on liability for a business’s debts as part of an unsuccessful attempt to turn it around.
Payment holidays Another factor that may also affect personal insolvency numbers is the ending of the various payment holidays that are currently available – especially if people’s incomes have not returned to the level they were at before the pandemic began. Our advice to anyone who is worried about their personal or
their business’s financial health is to seek advice from a qualified professional as soon as they start to see signs they might be in trouble. Doing so will give them the best chance of turning their situation around – and more options and more time to take a decision on how they move forward. CCR
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www.CCRMagazine.com September 2020
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