South East: Insolvency trade body calls for clarity

Insolvency professionals in the South and Thames Valley have called on the chancellor for clarity about the end of government emergency support.

R3, the trade body for restructuring and insolvency professionals, has urged Rishi Sunak to outline how schemes will be wound down in his budget on March 3. The comments come after the release of the latest corporate and personal insolvency statistics for January 2021 in England and Wales. Sharp falls are recorded – with half the number of corporate insolvencies in January 2021 compared with January 2020.

The figures show:

Corporate insolvencies decreased by 39.1% to 752 in January 2021 compared with December 2020’s figure of 1,235. They were 50.4% lower than January 2020’s figure of 1,515.

Personal insolvencies decreased by 13.7% to 8,305 in January 2021 compared with December 2020’s figure of 9,623. They were 20.8% lower than January 2020’s figure of 10,482.

Garry Lee, chair of the R3 Southern and Thames Valley region, said: “These figures don’t reflect the fact that the economic fallout from the pandemic is continuing to hit businesses, individuals, and the wider economy. It’s clear the Government’s support packages are helping prevent the rise in insolvency numbers that we would have expected to see in an economic climate like this one. However, the support packages and bans on creditor enforcement actions can’t last forever.

“We hope that the chancellor will use his budget on March 3 to outline how they will be wound down in an orderly manner in the medium term, and how businesses, staff, and the self-employed will be supported during this period. Members are telling us that companies are hesitant to make plans with conditions liable to change at any moment, so clarity around the future of the support schemes will help directors with their planning for the rest of the year.”

Lee, an associate director in the recovery and restructuring services department at accountancy firm Smith & Williamson, added: “New restructuring tools introduced by the Government provide a fresh range of options for companies in distress.

“But to make the most of them it’s more important than ever that business leaders seek advice as early as possible from a qualified, regulated source. Most R3 members will give an hour’s free consultation to clients to discuss their situation and the challenges they face, and to outline the potential options for turning the situation around.”

January’s fall in corporate insolvency numbers was driven by a drop in all of the formal corporate insolvency procedures: creditors’ voluntary liquidations, administrations, and company voluntary arrangements.

In relation to personal insolvencies, a fall in individual voluntary arrangements accounted for most of the change between December 2020 and January 2021.

A lower level of debt relief orders and bankruptcies was mainly behind the fall between January 2020 and January of this year.

Lee said: “The Government’s support measures have preserved a large number of jobs, which is undoubtedly keeping individual insolvency levels relatively low.”