UK sees worrying surge in Business insolvencies

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Surge in business insolvencies

Latest quarterly figures from the Insolvency Service have indicated that business insolvency numbers across England & Wales were 31% higher than in Q1 2021 and 4% higher than in Q2 2020.

There were 3,116 seasonally adjusted corporate insolvencies in Q2 2021, an increase of 31.4% compared to Q1 2021’s figures of 2,371 and a rise of 4% compared to Q2 2021 (2,997).

Commenting on the figures Colin Haig, President of insolvency and restructuring trade body R3 and Head of Restructuring at Azets, said “The increase in corporate insolvencies – to the highest quarterly total in 18 months – has been driven by a rise in Creditors’ Voluntary Liquidations (CVLs), which have increased to pre-pandemic levels.”

“It’s hard to say what’s driving this increase in CVLs, but it could be that directors of a number of companies have decided they can no longer go on trading as a result of the pandemic and are opting to close down their businesses by using the CVL process before the situation deteriorates further.”

“What is clear is that the figures published today show the toll the challenges of the last three months – and the twelve before them – have taken on the business community.”

“While many business owners were hoping the lifting of the lockdown would help them, they reopened amid low consumer confidence, a time when people were being encouraged to stay local, and when the economy was still a long way from recovering from the blow the start of the pandemic dealt it. The formal end of lockdown may have improved their situation, but it wasn’t the boost many businesses had hoped for.”

“However, the Government’s support measures have remained in place over this period and are likely the reason why today’s increase isn’t as severe as it could have been. This support has been a lifeline for many businesses, but with the end of furlough in sight, directors now need to take the time to plan for how they’ll manage when this initiative ends.”

“Looking ahead to the next quarter, the picture appears to be more positive. The economy is continuing to recover – the IMF has predicted it will grow by seven per cent this year, consumer spending is now above 2019 levels, and people are more optimistic about their personal finances.”

“With the removal of the final Covid restrictions and the vaccine rollout continuing, there’s a chance many businesses may be able to return to near-normality again – although some sectors will take longer to get to this point.”

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