Business insolvencies rise in August
Latest figures from the Insolvency Service have indicated that business insolvencies increased by 22.9% to 1,348 in August 2021 compared to July’s figure of 1,097, and increased by 71.1% compared to August 2020’s figure of 788.
In August 2021 there were 1,256 Creditors’ Voluntary Liquidations (CVLs), which is the highest level seen in the series since January 2019.
The number of registered company insolvencies was similar to pre-pandemic levels, driven by a higher number of CVLs, although other types of company insolvencies, such as compulsory liquidations, remained lower.
In August 2021 the number of registered company insolvencies were at their highest level since the start of the first UK lockdown in March 2020 and were similar to pre-pandemic levels, with a total of 1,348. This was 71% higher than in the same month in the previous year, but 1% lower than in August 2019 (pre-pandemic).
The increase in company insolvencies was driven by an increase in the number of CVLs, which was similar to pre-pandemic levels.
Of the 1,348 registered company insolvencies in August 2021 there were 1,256 CVLs, which is more than double the number in August 2020 and 30% higher than in August 2019; 35 were compulsory liquidations, which is 55% lower than August 2020 and 82% lower than August 2019; Two were CVAs, which is 87% lower than August 2020 and 93% lower than August 2019;
There were 55 Administrations, which is 50% lower than August 2020 and 69% lower than August 2019; and there were no receivership appointment.
Between 26th June 2020 and 31st August 2021, 13 companies obtained a moratorium and nine companies had a restructuring plan registered at Companies House. These two new procedures were created by the Corporate Insolvency and Governance Act 2020.
Commenting in the figures Colin Haig, President of insolvency and restructuring trade body R3 and Head of Restructuring at Azets, said “The insolvency figures published today highlight how much tougher the climate is for businesses and individuals than this time last year, and the toll the pandemic has taken on business and personal finances over the last 12 months.”
“The increase in corporate insolvencies was driven by a rise in Creditors’ Voluntary Liquidations (CVLs). Numbers for this process were 115% higher than this time last year, and 30% higher than in 2019, which suggests that despite the opening up of the economy, there are a number of company directors who are opting to close their businesses after a year and a half of trading in a pandemic.”
“This comes despite the fact that August was one of the better months for businesses since the start of the pandemic. The lifting of the final restrictions and the continued impact of the vaccine rollout means that more people are working, shopping and spending, and that looks set to continue as we enter the autumn.
“However, with the furlough scheme closing at the end of this month, company directors need to be aware of the signs of business distress and seek advice if any of them appear.
“If a firm has problems paying rent, staff or suppliers, has issues with cashflow, or its directors are concerned about its future, now is the time to seek advice from a qualified professional, rather than waiting till the problem has become worse.”
Bob Pinder, Director, Quality Assurance, Professional Standards at ICAEW said“It’s a fine balance at the moment for businesses,” said Pinder. “In some ways, it’s a tougher climate than August 2020 because of the winding down of government support, and there will be some businesses that have struggled through 18 months exiting now due to factors such as rising costs or staff shortages.”
“However, it’s the first set of numbers that shows a distinct rise in insolvencies, so it’s too early to draw many conclusions at the moment. Our advice for business or individuals is always to take advice early from a qualified individual – that way you’ll have more options,”