The Insolvency Service has released the latest figures for June, which show that there was another fall in the number of business insolvencies compared with last year. The new monthly series of insolvency statistics are designed to provide up to date information on how the coronavirus pandemic is affecting businesses and individuals.
The insolvency figures for England in June 2020 show that there were 732 company insolvencies. This included 557 creditors’ voluntary liquidations (CVLs), 100 administrations, 61 compulsory liquidations and 14 company voluntary arrangements (CVAs). There were no receiverships reported for the last month.
Government measures working
One of the main reasons for the drop in insolvencies, compared with June 2019, are the measures put in place by the government to support businesses during the pandemic.
This includes a ban on the use of statutory demands and winding up petitions, where a debtor cannot pay due to problems surrounding Covid-19. This was initially set to run from 27th April to 30th June. However, it has since been extended until 30th September 2020 under the Corporate Insolvency and Governance Act.
Overall, the number of company insolvencies fell by 50% compared to the same period last year. The key driver for this was a drop of 78% in the number of compulsory liquidations. There was also a 45% decrease year on year in the amount of CVLs.
CVAs fell by 60% in June compared with the 2019 figure and there was a 33% drop in those businesses entering administration.
Christina Fitzgerald, Vice President of insolvency and restructuring trade body R3, commented: “The June statistics show both corporate and personal insolvencies fell compared to May’s figures. The decrease in the number of corporate insolvencies was driven by a sharp reduction in the number of Creditors’ Voluntary Liquidations and a drop in administrations…
“Today’s statistics still do not show the effects of the pandemic on personal and corporate insolvency levels. In part this is because of the time it takes to set up and enter corporate and personal insolvency processes, but also because of the Government’s support measures, which will have provided a valuable safety net for many people and businesses.”
Impact of Covid-19 on businesses
The statistics for June might not show the full picture. As the country begins to return to a new normal, businesses will continue to require support. This could be help with bringing employees back from furlough, managing shortfalls in their cashflow or increasing demand for their products and services.
The latest Business Impact of Covid-19 Survey from the Office for National Statistics highlights that 64% of businesses that are continuing to trade have seen a lower than normal turnover in the past two weeks.
The accommodation and food sector has been one of the sectors hardest hit by the lockdown restrictions. Even though many businesses are now starting to trade once again, turnover has still seen a significant decline. 58% of companies in this industry saw their turnover fall by more than half.
Christina Fitzgerald continued: “Our members are telling us that requests for formal insolvency support have not been significantly higher than before the pandemic. However, there has been a significant increase in existing and new clients asking for support with managing a reduction in demand for their products and services, and guidance around how they can manage working capital shortages in cashflow forecasts as the economy gets moving again.
“The situation is still tough for many people with little sign of economic improvement on the horizon. That’s why anyone who starts to see problems with their business or personal finances should seek advice from a qualified source as early as they possibly can.”
More information:
Lockdown sees a decrease in business insolvencies
Sharp rise in volume of unpaid invoices since the start of lockdown