Corporate insolvencies in England and Wales increased in July by 29% when compared to June 2020 as the Covid-19 pandemic began to significantly impact business survival rates.
Garry Lee, chair of insolvency and restructuring trade body R3’s Southern & Thames Valley region and associate director of the recovery and restructuring services department at accountancy firm Smith and Williamson’s Southampton office, commented on the publication of the July corporate and personal insolvency statistics:
"The month-on-month rise in corporate insolvencies in July is largely down to an increase in administrations, Compulsory Liquidations, and Creditors' Voluntary Liquidations (CVLs). Although overall numbers remain low in comparison to the same time last year, this uptick could suggest that the pandemic might now be starting to be seen in the insolvency figures.
“It’s important to note that although today’s statistics suggest the pandemic is starting to affect corporate insolvency levels, the Government’s continued support for businesses and consumers means we’re not much nearer to understanding how Covid-19 is truly affecting underlying corporate or individual distress than we were last month.
“However, all the signs point to a tough road ahead. The UK has entered a recession, consumer confidence is low, and a number of big-name brands have recently announced they are exploring or have entered insolvency or restructuring procedures.
“This suggests the business climate will be challenging in the foreseeable future – and will not be made any easier as the Government support packages begin to wind down.
“Our members are telling us that it may not be long before companies which would be viable under normal circumstances begin to seek support from an insolvency and restructuring professional, as a result of the impact of the pandemic.
“This may lead to an increase in requests for personal insolvency support if people lose their jobs or agree to take on liability for a business's debts, by virtue of personal guarantees, as part of an unsuccessful attempt to turn it around.
“Another factor that may also affect personal insolvency numbers is the ending of the various payment holidays that are currently available – especially if people’s incomes haven’t returned to the level they were at before the pandemic began.
"Our advice to anyone who is worried about their personal or their business’s financial health is to seek advice from a qualified professional as soon as they start to see signs they might be in trouble. Doing so will give them the best chance of turning their situation around – and more options and more time to take a decision on how they move forward."