Business insolvencies increase by 4%

New figures from the Insolvency Service have shown that business insolvencies in England and Wales increased by 4% in November 2020, with 889 business insolvencies in November 2020 compared to October’s figure of 862, and were 41% lower than November 2019’s figure of 1,512.

However, business insolvencies in November 2020 fell by 41% compared with November 2019 numbers.

November 2020 figures comprised of 767 creditors’ voluntary liquidations (CVLs), 34 compulsory liquidations, 73 administrations and 15 company voluntary arrangements (CVAs). There were no receivership appointments.

The overall number of company insolvencies decreased by 41% in November 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 28% and 88% respectively. The number of companies entering administration in November 2020 also fell when compared to the same month last year by 51%. CVAs fell by 29% in November 2020 in comparison to the same period last year.

Commenting on the figures Colin Haig, President of insolvency and restructuring trade body R3 and Head of Restructuring at Azets, said  “The increase in corporate insolvency numbers in November has been driven by a rise in Creditors Voluntary Liquidations (CVLs). However, Company Voluntary Arrangements (CVAs), Administrations and Compulsory Liquidations all fell compared to the previous month.

“Despite the small monthly increase in overall corporate insolvencies, the statistics published today are not an accurate reflection of the state of the economy or the state of the UK business community.”

“Businesses and individuals from Land’s End to John O’Groats have been affected by COVID-19 and the only reason this hasn’t shown up in the insolvency statistics yet is because of the extensive support the Government has provided. Without it, we’d be in a very different situation – and a very grave one at that.

“The economy is still nearly 8% smaller than it was in February, unemployment has increased, and a number of big brands have entered insolvency processes or announced restructuring programmes in recent weeks.”

“That said, the extension of the furlough scheme and the temporary ban on winding-up petitions until the end of March will provide some reassurance to many businesses and their staff as we go into the Christmas period and the first quarter of 2021.”

“However, the effect of the various restrictions and lockdowns across the UK remains to be seen, and questions remain about the Government’s strategy for eventually winding down its packages of support and what will happen to those benefiting from these measures once they end. Against this backdrop, and with the clock ticking, continued uncertainty around the UK’s future trading relationship with the EU is one issue that many already struggling firms could do without.”

“A good festive trading period has never been more important, but the impact of repeated stop-start closures in many sectors, and the disruption to usual pre-Christmas activities and events, mean that many companies will face a cold start to 2021.”

“As we approach the end of this year, it becomes even more critical that company directors and individuals seek advice from a qualified source as soon as they see signs their business or their personal finances are starting to struggle. The earlier they seek advice, the more options they have to resolve their situation, and the more time they have to take a considered decision about how they move forward.”