A fall in the number of corporate insolvencies last month should not be taken as a sign that all is well for businesses, an industry trade body in the South West is warning.
Statistics for June, published by the Insolvency Service, show there were 732 company insolvencies in England and Wales last month - lower than the figure for May (945) and a 50 per cent drop compared to the number for June 2019 (1,465).
But R3 - a trade association for the UK's insolvency and restructuring professionals - said the data does not reflect the “harm the pandemic is wielding”.
According to the association, the fall in corporate insolvencies was driven by a sharp reduction in the number of creditors’ voluntary liquidations and a drop in administrations and compulsory liquidations.
R3’s South West chair Philip Winterborne, a partner at Temple Bright solicitors, said: “The statistics still do not reflect the harm that the pandemic is wielding on businesses due to two key factors.
“[One is] the time lag between setting up and entering corporate insolvency processes, and [the other is] the Government’s valuable safety net of business support measures.”
Mr Winterborne said the UK’s economic contraction in April and May showed that consumer spending had halted, and confidence was low during both months, with no real improvement in June.
The news comes a week after Prime Minister Boris Johnson announced a blueprint for companies to get staff back into their workplaces over the next nine months.
The idea is to get people back into city centres, where businesses such as retailers and restaurants have been hit hard.
“Business owners are naturally worried about the health of the economy over the next year and, ultimately, about their own financial survival,” said Mr Winterborne.
“The situation is still tough for many people, with little sign of economic improvement on the horizon."
According to a recent survey of R3 members, there has been a “significant increase” in existing and new clients requesting support with managing reduced demand for their products and services.
The research also found members’ clients are asking for guidance around how they can manage working capital shortages in cashflow forecasts.
Mr Winterborne added: "Anyone experiencing problems with their business or personal finances should seek advice from a qualified source as early as they possibly can.”
