Company insolvencies surge as businesses urged to take action early

Company insolvencies surge as businesses urged to take action early

Insolvency figures recently released for June 2021 by the Government’s Insolvency Service show a 63% increase in corporate insolvencies compared to the same month last year (741 in June 2020). However insolvencies are 18% lower than the number registered two years previously (pre-pandemic; 1,466 in June 2019).

Corporate insolvencies - tougher times ahead as insolvencies forecast to rise

Leading restructuring and insolvency professional, Oliver Collinge from PKF GM said:

“This trend of rising corporate insolvency numbers has long been predicted and we expect it to continue as government support schemes reduce and the temporary restrictions on the use of certain creditor enforcement actions are lifted. It is inevitable that insolvency numbers will return at least to pre-pandemic levels relatively soon and possibly higher for a period of time.”

“One of these temporary restrictions, namely the moratorium on issuing winding up petitions, is due to end on 30 September 2021 which, if not pushed back again, could trigger a sharp rise in corporate insolvencies in the coming months as creditors will be able to enforce their rights again. The end of the furlough scheme is also due at the end of September 2021, which will put further cash flow pressure on some companies in the region and will likely increase insolvencies in the last quarter of 2021 and the start of 2022.”

“Most remaining lockdown measures have been released this week and a number of businesses that have been closed or operating at reduced capacity for much of the last eighteen months have now reopened. We expect many businesses may begin to encounter cash flow pressure, particularly if revenues do not quickly return to pre-pandemic levels.”

“With an increased working capital requirement on re-opening, there will be multiple added pressures on businesses in the coming months, particularly those that weren’t in robust financial health before Covid.”

“The added pressure of self isolation and resulting risk of businesses having to temporarily close due to staff isolating will also cause a considerable burden at a time when many are struggling to break even.”

“It’s critical businesses act early and seek advice if they are struggling now, or think cash flow may be squeezed in coming months. The earlier they act, the more options they’ll have to continue trading and recover.”

A message to company directors

Oliver Collinge added:

“There are plenty of proactive things you can do now to build resilience into your business for the post-Covid economy; don’t leave it too late. Having a restructuring professional guide you through the process can be invaluable in getting the best outcome and will also help you understand and mitigate your risk as a director.”

“For those businesses who have just reopened, now may be the time to begin negotiations with landlords and creditors to develop manageable repayment plans. Will revenues be high enough to support your cost base? Will cash flows be sufficient to deal with the additional debt burden (both formal and informal) that has accrued during lockdown? Perhaps a CVA is something which should be considered or, where you may need to take the difficult decision to make redundancies to survive, consider applying for government funding to meet the short term cash impact of this.”

*June 2021 insolvency numbers - breakdown

Of the 1,207 registered company insolvencies in June 2021:

There were 1,116 CVLs, which is twice the amount in June 2020 and 11% higher than June 2019;

38 were compulsory liquidations, which is 46% lower than June 2020 and 86% lower than June 2019;

14 were CVAs, which is the same as June 2020 but 60% lower than June 2019;

There were 39 Administrations, which is 61% lower than June 2020 and 74% lower than June 2019; and

There were no receivership appointments

ENDS

https://www.gov.uk/government/statistics/monthly-insolvency-statistics-june-2021

Notes to Editors

For further information, please contact katy@meteoric.marketing or 07966 527168


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About PKF GM

At PKF Geoffrey Martin & Co, we provide practical advice concerning financial distress, contingency planning and insolvency. We advise directors, owners, investors and financiers at all stages of the business life cycle. Whether your business is growing or struggling, we have the expertise to help you achieve your objectives. We work across all industry sectors from property to technology, restaurants to insurance, and the needs of our clients always come first.


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