Business Insolvencies decrease in June

The overall number of company insolvencies in England and Wales decreased by 50% in June 2020, when compared to the same month last year.

This was primarily driven by a decrease in the numbers of CVLs and compulsory liquidations which fell by 45% and 78% respectively.

Additionally, there was a 60% decrease in the numbers of CVAs, and a 33% decrease in the number of companies entering administration.

The reduction in company insolvencies was likely to be in part driven by the range of Government policies put in place to financially support companies in response to the coronavirus (COVID 19) pandemic. The Government also announced in late April that it would temporarily prohibit the use of statutory demands and certain winding-up petitions from 27th April to 30th June 2020.

This was further extended to 30th September under the Corporate Insolvency and Governance Act. Additionally, compulsory liquidations require a winding-up order obtained from the court by a creditor, shareholder or director. Since the UK lockdown was applied on the evening of 23rd March 2020 to slow the spread of the coronavirus, the HM Courts & Tribunals Service has reduced the operational running of the courts and tribunals.

There was a total of 732 company insolvencies in June this comprised of 557 creditors’ voluntary liquidations (CVLs), 61 compulsory liquidations, 100 administrations and 14 company voluntary arrangements (CVAs). There were no receivership appointments

Commenting on the figures Christina Fitzgerald, Vice President of insolvency and restructuring trade body R3, said “The June statistics show both corporate and personal insolvencies fell compared to May’s figures. The decrease in the number of corporate insolvencies was driven by a sharp reduction in the number of Creditors’ Voluntary Liquidations and a drop in administrations. While personal insolvency numbers have also remained low, with bankruptcies showing a particular fall, the overall picture is much cloudier due to a number of issues that have affected the processing of Individual Voluntary Arrangement registrations.

“Today’s statistics still do not show the effects of the pandemic on personal and corporate insolvency levels. In part this is because of the time it takes to set up and enter corporate and personal insolvency processes, but also because of the Government’s support measures, which will have provided a valuable safety net for many people and businesses.”

“However, the economic contraction in April and May shows that consumer spending had halted, and consumer confidence was unsurprisingly low during both months, with no real improvement in June. People are naturally worried about their finances and the health of the economy over the next year, and with many thousands of job losses recently announced and with more predicted to come, it is easy to see why.”

“Our members are telling us that requests for formal insolvency support have not been significantly higher than before the pandemic. However, there has been a significant increase in existing and new clients asking for support with managing a reduction in demand for their products and services, and guidance around how they can manage working capital shortages in cashflow forecasts as the economy gets moving again.”

“The situation is still tough for many people with little sign of economic improvement on the horizon. That’s why anyone who starts to see problems with their business or personal finances should seek advice from a qualified source as early as they possibly can.”