Company Insolvencies continue to decrease

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The latest figures provided by the Insolvency Service have indicated a further 22% reduction in Company insolvency rates across England and Wales.

The figures show that business insolvencies fell by 7.2% to 925 in April 2021 compared to March’s figure of 997, and fell by 22.9% compared to April 2020’s figure (1,199).

In April 2021 there was a total of 925 registered business insolvencies, comprised of 819 CVLs, 26 compulsory liquidations, 75 administrations and 5 CVAs. There were no receivership appointments.

Compulsory liquidations were 74% lower than 2020 and 89% lower than 2019, CVLs were 12% lower than 2020 and 20% lower than 2019. CVAs were 76% lower than 2020 and 81% lower than 2019 and Administrations were 48% lower than both 2020 and 2019.

The overall number of registered business insolvencies in April 2021 was 23% lower than in the same month in the previous year and 35% lower than in April 2019.

Commenting on the figures Christina Fitzgerald, R3, said “The monthly fall in corporate insolvency numbers shown in the figures published today has been driven by a drop in Compulsory Liquidations and Creditors’ Voluntary Liquidations.”

“We now have a year’s worth of pandemic insolvency figures, and 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.”

“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. And company directors need to make the most of the time they have left before these support measures finish to plan for the future, and work out how they will manage without state support.”

“The situation is still tough for many British businesses. While spending is increasing, it’s still below 2019 levels and consumer confidence remains low, although people are more optimistic about their finances over the next 12 months.”

“The easing of the lockdown in the middle of April, and the further lessening of restrictions this week, will be a boost to many businesses. That said, a large number are still having to work in a way that complies with Covid guidelines, adding cost and complication to their operations.”

“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.”

Whilst Matt Richards, Restructuring and Insolvency Partner at Azets said “The number of insolvencies in April (925) was 7% below March (992) and 23% below April 2020 (1,199) and 35% below April 2019 (1,429). We expect this trend of low corporate insolvency numbers to continue into May and June while government support schemes remain available. However, the tide is likely to turn soon.”

“While it remains uncertain exactly when the number of insolvencies will increase, it is inevitable that they will return to at least pre-pandemic levels in the future. Now that the lockdowns are easing and a number of businesses that have been closed for most of the last 12 months are allowed to reopen, we expect that more businesses will need to carefully consider what future funding they will require if sales do not quickly return to pre-pandemic levels. Insolvency levels will rise when that funding is no longer readily available through the government schemes and creditors are once again able to enforce their rights.”

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