First full-year figures since the onset of the Covid pandemic have revealed how government support has prevented an insolvency tsunami, according to the R3 trade body for the south and Thames Valley.
The latest statistics from the Insolvency Service revealed a 22.9% drop in corporate insolvencies in April 2021 compared with April of 2020 in England and Wales.
The figures show:
Garry Lee, chair of restructuring and insolvency trade body R3’s Southern and Thames Valley region, said: “We now have a year’s worth of pandemic insolvency figures. It’s clear the Government’s support measures have prevented a significant number of businesses from becoming casualties of the economic consequences of Covid-19.
“The big question is what will happen to insolvency numbers as we come out of the pandemic, but there are too many variables to say with much certainty about exactly what this will look like. The Government has a challenge on its hands in terms of managing the exit from lockdown and the withdrawal of its financial support measures. How it handles this will help to determine if there is a sharp spike of business failures or simply a smoother return to pre-pandemic insolvency levels.”
The monthly fall in corporate insolvency numbers was driven by a drop in compulsory liquidations and creditors’ voluntary liquidations.
Lee, who is an associate director in the recovery and restructuring services department at accountancy firm Smith & Williamson’s Southampton office, added: “Company directors need to make the most of the time they have left before the support measures finish. They need to plan for the future and work out how they will manage without state support.
“The temporary ban on winding-up petitions is due to finish at the end of June, and other government support schemes are due to be withdrawn in the next few months, which will clearly increase pressure on financially struggling firms.
“We urge anyone who is worried about their finances to ask for advice from a qualified, regulated adviser – and to do it as soon as possible. It’s a hard step to take, but the sooner you do it, the more potential solutions you have open to you, and the more time you have to decide which of them is the most appropriate.”
R3 is the trade association for the UK’s insolvency, restructuring, advisory, and turnaround professionals. We represent insolvency practitioners, lawyers, turnaround and restructuring experts, students, and others in the profession. Our members are qualified, regulated and work across the spectrum of the profession, from the global legal and accountancy firms through to smaller, local practices.