Q2 company insolvency stats reaction

The rate of company insolvencies across England and Wales between April and June was down by 23 per cent versus the previous quarter and 33 per cent down year-on-year – with construction, retail and food and accommodation all suffering the most insolvencies; according to The Insolvency Service’s quarterly company insolvency statistics.

Creditors’ voluntary liquidations (CVLs) were the most common type of company insolvency in England and Wales, accounting for nearly four-fifths of cases. The drop in CVLs was the main driver for the overall decrease in company insolvencies, falling 12 per cent from Q1 2020.

Reacting to the figures, CVR Global’s Brendan Clarkson said: “These figures undoubtedly mask the economic damage that is set to be unleashed on our economy towards the end of this year when financial government support dries up and current rules prohibiting winding up orders are relaxed.

“There are hundreds of thousands of zombie businesses out there that are still only servicing their debts because of the Government’s Coronavirus Business Interruption Loan Scheme or, alternatively, the Bounce Back Loan Scheme – and even these loans are expected to be paid back.

“These latest figures reinforce the sectors that have been hardest hit by the pandemic – namely hospitality (not to mention the events industry who are still suffering) and retail – and although construction has been struggling for a while it is set for a shot in the arm given the Government’s commitment to improving infrastructure over the coming years.

“We are on the cusp of another recession and all sectors are facing choppy waters that they are going to have to navigate if they are to survive – which will inevitably involve further restructuring and redundancies, and business going back to the drawing board to invest in efficiencies in the areas that drive the most profit.

“There is, however, cause for optimism if businesses proactively seek professional financial advice now. There are signs that more directors are now waking up given that four fifths of company insolvency cases between April and June were being driven by the directors of companies themselves.

“The earlier that owners engage their creditors in their situation and future plans, the more likely that they will be receptive to whatever turnaround plan is presented to them.”