South West businesses are being urged to take early action if their finances are under strain after new Government figures showed corporate insolvencies have hit their third highest monthly total since the start of the pandemic.
Statistics reveal 1,207 companies registered as insolvent in June 2021 across England and Wales - a 63% rise in the number for June 2020.
The numbers are, however, lower than before the pandemic, due to fewer compulsory liquidations during a time when there has been widespread Government support for flailing businesses.
But experts are alarmed at the growth in creditors voluntary liquidations (CVLs), where firms unable to pay debts opt to go into liquidation.
According to R3, the insolvency and restructuring trade body which covers the South West, the delay in lifting Covid restrictions may have contributed to the rise in CVLs. It urged businesses and individuals with financial concerns to seek support earlier rather than later.
The statistics for June 2021 from the Insolvency Service for England and Wales showed corporate insolvencies increased by 19% to 1,207 in June 2021 compared to May’s figure of 1,014. They rose 62.9% compared to June 2020's figure of 741.
Meanwhile, personal insolvencies rose too, by 15.8% to 9,836 in June 2021 compared to May’s figure of 8,497. They were 18.8% higher than June 2020's figure of 8,282.
R3 South West chair Philip Winterborne, a partner at Temple Bright Solicitors in Bristol, said: “The increase in corporate insolvencies between May and June – to the third highest monthly figure since the pandemic started – has been driven by a rise in CVLs.
“The Government’s decision to delay lifting the final Covid restrictions for another month has clearly been a further blow to the business community and may have been particularly unhelpful for the hospitality and retail sectors, which have been hit hardest by trading restrictions and lockdowns.
“It may be that this impact has been reflected in today’s statistics as the rise in CVLs, used by directors to voluntarily close a company, suggests that for many directors the delay to the removal of the restrictions may have simply made it uneconomic to continue trading.”
The highest number of corporate insolvencies in any month since the start of the lockdown was 1,237 in December 2020. The next highest was 1,235 in March 2020, the month in which England entered its first lockdown.
The rise in personal insolvencies in June 2021, can be attributed to an increase in Individual Voluntary Arrangements.
Mr Winterborne said: “When it comes to personal insolvency, the figures show the damaging effect of the pandemic on people’s personal finances and their financial health.
“While the pandemic has led to many people repaying their debts and boosting their savings, others have borrowed more, used their savings to cover a shortfall in income, or deferred paying certain debts.
“It’s these people who are financially vulnerable as things tentatively return to normal – and may be one unexpected shock away from running into trouble.”
He added: “Anyone who is concerned about their finances – either business or personal – in Plymouth should seek advice from a qualified and regulated source as soon as possible.
“Taking the initiative, rather than avoiding the issue, will mean you have more options open and more time to consider your next step.”
R3 is the trade association for the UK’s insolvency, restructuring, advisory, and turnaround professionals. It represents insolvency practitioners, lawyers, turnaround and restructuring experts, students, and others in the profession. Members are qualified, regulated and work across the spectrum of the profession, from the global legal and accountancy firms through to smaller, local practices. R3 stands for ‘Rescue, Recovery, and Renewal’ and is also known as the Association of Business Recovery Professionals.
