Published: 12/10/2020 By Jane PriceThe number of individuals and businesses becoming insolvent has remained low according to the latest data for August, but indications are growing that they could rise sharply as the amount of Government support is withdrawn.
According to the latest data from the Insolvency Service, there were 778 company insolvencies in England and Wales, which was 43% fewer than the previous year.
Much of this was due to a decline in compulsory liquidations and creditors’ voluntary liquidations (CVLs) in this period, which decreased by 67% and 39% respectively.
August 2020 also saw 110 administrations,15 company voluntary arrangements (CVAs) and one receivership appointment. This means that there also were 50% fewer CVA's and 38% fewer administrations than in August 2019.
Many see the sustained decline in insolvencies during the Coronavirus crisis as a reflection of the generous financial measures put in place by the Government, including the Coronavirus Job Retention Scheme and various loans. Many of these measures are now due to be withdrawn in the coming weeks and months.
Although the Government has pledged new financial support in its Winter Economy Plan, many of these new initiatives do not provide the same level of support as before and are designed to only assist ‘viable’ jobs and businesses.
With almost half a million people already made redundant this year and many more still reliant on furlough, there are growing fears about a sudden and sharp rise in insolvencies in the latter half of 2020 and into 2021.
As well as affecting corporate insolvencies, the withdrawal of support leading to loss of jobs and assets is likely to lead to a growing number of personal insolvencies.
However, at present, personal insolvencies are also considerably lower in August 2019 – 6,359 in total compared to 8,892 12 months ago.
Colin Haig, President of insolvency trade body R3, said: “There is no question that the pandemic is taking its toll on businesses and individuals, but this impact is not being reflected in the insolvency figures, yet. The Government's support measures have provided vital protection for businesses and consumers, but as they begin to wind down and this crucial safety net disappears, we expect to see more requests for personal and corporate insolvency advice and support.”
If you are concerned about the impact of financial measures being wound down or reduced and how it may affect you or your business, please contact us.