According to official figures released earlier this month, company insolvencies in England and Wales are on the rise for the first time since these countries were hit by the Covid-19 pandemic and consequent lockdown measures.
In December 2020, 1,228 companies filed for insolvency, a 9.2% increase on the same month in 2019 and the first rise in insolvencies since February 2020.
This rise in insolvencies comes in spite of ongoing Government support as a result of the pandemic, including furlough support, bounce back loans and rate relief, in addition to concessions from banks and landlords, including mortgage holidays for those whose income was affected by lockdown measures.
“These figures show that the economic impact of the pandemic may now finally be pushing increasing numbers of struggling businesses and individuals over the line into formal insolvency,” said Colin Haig, president of R3, EWS’ insolvency and restructuring trade body.
The Insolvency Service, on the other hand, who released the above statistics showing December’s spike in insolvencies, expressed more caution in a statement, claiming it is “too soon to tell whether this represents an emerging trend”.
The situation appears to be somewhat less grave in Scotland, where company insolvencies fell by 36% in December, to 57, whilst Northern Island recorded a 79% drop.
In addition to corporate insolvencies, personal insolvencies also appear to be on the rise in England and Wales, with 7,918 individual voluntary arrangements reported in the December quarter, 38% higher than the same quarter in the previous year. An individual voluntary arrangement (IVA) is a legally binding deal with a creditor, which sets out a clear repayment plan for some, or all, of the money that is owed, but giving borrowers some level of breathing space to pay only how much is achievable.
However, other forms of personal insolvency – debt relief orders and bankruptcies – fell in December.
EWS Conclusion
The reported rise in insolvencies seen last month would suggest that the economic impact of the pandemic is finally taking its toll and pushing businesses and individuals alike over the edge and into formal insolvency proceedings. It may, however, prove difficult to argue that this fact comes as a surprise. Many would say that it was simply a question of if, and not when, 2020 would finally see a rise in insolvencies as a result of the Covid-19 pandemic.
It may, however, be possible to plan how best to deal with those issues with a view to preserving a viable business. Talk to us at the earliest opportunity and we can work together to protect your clients or business.
About Elwell Watchorn & Saxton
Elwell Watchorn & Saxton (EWS) is an independent business recovery firm with a collaborative approach and a commitment to finding the right solutions for businesses and individuals with financial challenges. Our reputation and focus on the best quality of service and project delivery means that we are constantly recommended by professionals to work with businesses and individuals that face financial difficulties.
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