In Focus Collections
A view on the figures
Figures for insolvencies in the first quarter of 2020 showed positive trends, but may hide future problems
Duncan Swift Past president, R3
Last month saw the publication of the first quarter 2020 (January-March 2020) England & Wales insolvency statistics, by the Insolvency Service.
Corporate insolvencies Underlying corporate insolvencies fell by 8.5% in first quarter 2020 compared to the fourth quarter of 2019 and fell by 8.5% compared to first quarter of 2019. The surprising decline in levels of
corporate insolvency in the first quarter 2020 is partly reflective of the improving post-Election business climate, which was abruptly curtailed by the COVID-19 pandemic. However, today’s quarterly and year-
on-year decrease in corporate insolvency numbers is highly unusual given the circumstances and climate, and very unlikely to last. The impact of the coronavirus on every
aspect of the business world is hard to overstate, and almost all companies, from
multinationals to microbusinesses, have been affected. Given the role of the courts in some
corporate insolvency processes, as the Insolvency Service notes, the first quarter statistics may well have been artificially suppressed, to a degree, due to the curtailment of normal working hours by the courts. We may well see a backlog of cases coming through in future releases. Businesses have been affected by the
continued uncertainty around Brexit and the future of the UK’s trading relationship with the EU, with some seeing a decline in demand from customers in Europe, while others have held off investing in staff, plant or stock until the landscape looks clearer. One unexpected silver lining, however, is
that many companies maximised their working capital facilities with their banks and lenders before the departure date of 31 January, in anticipation of any Brexit-related disturbances to business patterns. This will provide a cash cushion that will
be helping many to keep their companies afloat in the wake of the pandemic, and its huge impact on cashflow. Companies have adapted to the current
Businesses have been affected by the continued uncertainty around Brexit and the future of the UK’s trading relationship with the EU, with some seeing a decline in demand from customers in Europe, while others have held off investing in staff, plant or stock until the landscape looks clearer
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supply and demand crisis: from forecasting cashflow and putting outgoings under the microscope, to setting up new ways of working for staff members where possible, to talking with suppliers, creditors and funders to try and find compromises or agree payment holidays, there are many ways that business owners have demonstrated their creativity and crisis management skills. Government support on an unprecedented
scale has been offered to companies and employees via the employee support scheme, state-backed business loans and
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grants, the suspension of business rates, a VAT holiday, the suspension of evictions from commercial properties for non-payment of rent, and so on. All of this is welcome, but it is clear that
it will not have been enough to keep every company afloat, especially those which had entered the crisis period with existing debt problems. Many members of the insolvency and
restructuring profession have changed their working practices as a result of the coronavirus, but despite that the profession stands ready to help, providing practical and immediate advice and support for directors facing circumstances unimaginable just a few short months ago.
Personal insolvencies Personal insolvencies fell by 3.9% in the first quarter of 2020 compared to the fourth quarter of 2019, and fell by 11.2% compared to the first quarter of 2019. A quarterly fall in personal insolvency
numbers is surprising given the challenges consumers faced early on in 2020, and given the general upward trend in personal insolvencies since around 2015. However, the Insolvency Service has urged
caution when looking at these statistics due to the disruption to normal insolvency processes caused by the coronavirus. It is notable that bankruptcies where the
creditor has initiated the process – which requires a court hearing – have fallen to their lowest level in at least 10 years, but bankruptcies initiated by the person in debt – which can be processed entirely online, with no need for court involvement – are at their highest level since the third quarter of 2014.
September 2020
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