Fall in insolvencies unlikely to last, warns trade body

Business insolvencies fell by 8.5% in real terms in the first quarter of 2020, according to the latest government figures.

However the decrease is unlikely to last and could, in part, be due to the impact of the lockdown on court proceedings, the insolvency and restructuring trade body R3 warns.

The latest figures from the Insolvency Service show there were 3,883 total company insolvencies in the first quarter.

Allan Cadman, North West chair of R3, said: “The decrease in corporate insolvency numbers is highly unusual given the circumstances and climate, and very unlikely to last.

“The impact of the coronavirus on every aspect of the business world is hard to overstate, and almost all companies, from multinationals to microbusinesses, have been affected.

“The statistics may well have been artificially suppressed due to the curtailment of normal working hours by the courts. We may well see a backlog of cases coming through in future releases.”

He added: “Businesses have been affected by the continued uncertainty around Brexit, with some seeing a decline in demand from customers in Europe, while others have held off investing until the landscape looks clearer.

“One unexpected silver lining, however, is that many companies maximised their working capital facilities with their lenders in anticipation of any disturbances to business patterns.

“This will provide a cash cushion that will help many to keep afloat in the wake of the pandemic, and its huge impact on cashflow.”

He said companies had adapted well during the lockdown, with business owners demonstrating their creativity and crisis management skills.

Mr Cadman, who is also a partner at Poppleton & Appleby, added: “Government support on an unprecedented scale has been offered to companies.

“All of this is welcome, but it is clear that it will not have been enough to keep every company afloat, especially those which had entered the crisis with existing debt problems.”