What story do the latest numbers tell us?

The number of corporate insolvencies across the UK has also risen slightly in the latest official monthly company insolvency statistics released by The Insolvency Service. 
 
For England and Wales, the total number of corporate insolvencies for May was 1,011.
 
This is an 8.8% rise on the 925 recorded in April and is 7% higher than the 946 recorded in May last year but still 25% down on the 1,352 recorded in May 2019.   
 
There’s a sense of Deja Vu about this set of statistics. 
 
Back in December, we saw a rise in insolvencies that also accompanied a rise in general spending just before the Christmas season (although not as much as a traditional one).
 
We then had another third lockdown and by January the number of insolvencies had collapsed again. 
 
So right now we are seeing increased consumer spending at exactly the same time that lockdown restrictions are being extended for at least the next four weeks which would indicate that it would be surprising to see figures increase next month.
 
The caveat to this is that while the lockdown is continuing, support measures are not. 
 
The temporary ban on creditor actions such as  statutory demands and winding-up petitions is being lifted at the end of June along with a halt on commercial evictions by landlords and employers will also be paying more towards staff furloughs before the CJRS finally winds up in September. 
 
All of which means that the trending direction of next month’s figures will be as intriguing as the numbers themselves.
 
The 1,011 company insolvencies in England and Wales consisted of 930 creditor voluntary liquidations (CVLs), 31 compulsory liquidations, 43 administrations and 6 company voluntary arrangements (CVAs). 
 
In comparison to the data for the same month from the previous two years, we see how depressed the numbers are right now. 

  • Compulsory liquidations are 6% lower than in 2020 and 89% lower than 2019.
  • CVLs are up 18% on 2020 but still remain 3% down on 2019.
  • CVAs are 50% lower than in 2020 and 81% lower than 2019
  • Administrations were 61% lower than 2020 and down 55% on 2019. 

Additionally, there were 51 company insolvencies in Scotland (made up of 8 compulsory liquidations, 37 CVLs, 5 administrations and one CVA) which was 46% higher year on year but 35% lower than in May 2019. 
 
Interestingly, Scottish company insolvencies tended to be led by compulsory liquidations but since the beginning of lockdown in March 2020, company voluntary liquidations have been the highest type of insolvency procedure in 12 out of the 14 subsequent months. 
 
There were also 7 company insolvencies registered in Northern Ireland (made up of one compulsory liquidation and 6 CVLs). This is a rise of two from last month and while 40% higher than May 2020, is 83% lower than the same period two years ago. As a note of caution, when dealing with such relatively low totals, any changes produce high percentage changes rather than being statistically significant in themselves.
 
The overall UK total of company insolvencies for May 2021 is 1,069, an overall increase of 101 from last month’s collective total. 

“Support has held off rather than halted the economic damage”

Duncan Swift, Immediate Past President of R3, the insolvency and restructuring trade body said: “Today’s increase in corporate insolvencies has been driven by a rise in creditors voluntary liquidations, while administrations have fallen to their lowest number since the start of the pandemic. 
 
“While it’s too early to say whether the mild increase in corporate insolvency numbers is the start of something bigger, times remain tough for businesses in the UK. 
 
“Government support has held off rather than halted the economic damage of the pandemic, preventing a serious rise in insolvency levels, but many business owners are now having to look ahead to how they’ll cope when these measures are withdrawn in the weeks and months ahead. 
 
“Business owners will be feeling increasing concern at the prospect of another delay to the easing of the lockdown in England and although the economy continues to grow, there’s still a lot of ground to make up to fully recover from the unprecedented economic contraction in April 2021. 
 
“Consumer spending has increased but it’s still below 2019 levels and while consumer confidence is improving, people are still worried about the future of the economy.”
 
From investment fund AI algorithms all the way to Mystic Meg, predicting the future is an uncertain science, especially when the variables keep changing. 
 
Restaurants, pubs, bars and other hospitality businesses who gambled on reopening at the end of the month will already be feeling the effects of the wrong call – even though it’s through no fault of their own. 
 
Most other business owners will understandably be nervous about what the next few weeks will hold because all restrictions were absolutely, positively going to be lifted on June 21st until suddenly they weren’t.   
 
With bounce back loans coming due and other support measures ending in a matter of days, getting professional advice on what options are available for directors and business owners should be one of the top priorities in the time remaining. 
 
We offer a free initial consultation where we can learn about what your immediate challenges are and provide you with effective and efficient options you can implement – right now – to help you revive, rescue or begin to restructure your business so you’ll be in the best position when restrictions end for everyone – whenever that is.