The economic effects of the pandemic continue to impact heavily on businesses as latest Government statistics show that corporate insolvencies have increased by more than half compared to the same time last year.
Monthly research by the Insolvency Service shows that while the proportion of insolvent businesses in England and Wales fell by 3.0% in October to a total of 1,405, the number is 63.6% higher than October 2020’s figure of 864.
According to the Midlands branch of insolvency and restructuring body R3, the dramatic year-on-year increase in corporate insolvencies indicates the sizeable number of directors who are finding the post-pandemic hurdles too high to jump and have closed their businesses down.
R3 Midlands chair, Eddie Williams, a partner at PwC in the East Midlands, said: “The month-on-month fall in corporate insolvencies has been driven by a reduction in the number of Creditors’ Voluntary Liquidations. There are still twice as many companies entering this procedure than this time last year, however, and nearly 20% more than in 2019.
“This would suggest that there are still a fair number of company directors who are choosing to close their businesses after deeming post-pandemic success unlikely. However, the fact that overall corporate insolvencies are 5% lower than the number in October 2019 suggests that the Government’s support measures have prevented the economic consequences of COVID-19 from translating into higher levels of corporate insolvency.
“The business climate is still harsh, with economic growth slowing, costs rising and consumer confidence falling. Although consumer spending is higher than it was this time last year, rising COVID case numbers and sharp energy price rises have meant many businesses aren’t seeing the benefits of this.
“As we move closer to Christmas, we would urge company directors to be mindful of the signs of business distress, which include cashflow problems, issues paying invoices, and concerns about paying staff, and get appropriate professional support as soon as they appear.
“The sooner advice is sought from a qualified and reputable source, the more potential there is for a solution. Many R3 members offer a free consultation to those who are looking for help with their business’s finances and want to explore their options.”
