Declining number of insolvencies could continue

A trend of declining insolvencies stands a strong chance of gathering pace over the coming months, according to one of CVR Global’s insolvency and restructuring experts.

The Insolvency Service has released its Company Insolvency Statistics for January to March, which saw 3,883 firms entering into insolvency – an 8.5 per cent reduction on the previous quarter, and the same quarter last year.

Construction continued to be the sector with the most insolvencies, followed by wholesale and retail trade, and the vehicle repair sector.

Despite the Insolvency Service’s statistics warning that their March figures may not capture the true scale of insolvencies caused by Covid-19, CVR Global’s Tom Gardiner believes there will continue to be a decline in companies entering into a form of insolvency for the foreseeable future.

He said: “Covid-19 has caused economic devastation across a variety of sectors, but thanks to the wide-ranging help being offered by the government, the majority of businesses have been able to map a potential way out of this unforeseen crisis.

“A combination of furloughing staff, VAT holidays, the relaxation of wrongful trading laws, and a temporary ban on commercial landlords demanding rent, have delivered some respite for businesses that simply want to be given the opportunity to trade once lockdown eventually ends.

“As IPs we are inundated with enquiries for guidance and advice, but given the unprecedented level of financial help that is currently on offer to distressed business, I do not believe that we will see a rise in insolvencies in the near future.

“For some businesses, the financial help on offer from the government is only delaying their financial demise – which will be reflected in statistics later in the year – but for a lot of firms that operate on thin profit margins, they need as much financial support as they can get to maintain a steady cash flow.”