Rise in July insolvencies indicates pandemic is starting to bite

A rise in the number of corporate insolvencies could indicate the impact of the pandemic is beginning to show, according to the insolvency and restructuring trade body R3.

The latest figures from the Insolvency Service reveal that the number of corporate insolvencies in England and Wales increased by 29% in July compared with the previous month, but was 34% lower than in July last year.

Allan Cadman, North West chair of R3 and a partner at Poppleton & Appleby, said: “Although overall insolvency numbers remain low in comparison to the same time last year, this uptick could suggest that the impact of the pandemic might now be starting to be seen in the insolvency figures.

“It’s important to note, though, that the Government’s continued support for businesses and consumers means we’re not much nearer to understanding how COVID-19 is truly affecting underlying business distress.

“However, all the signs point to a tough road ahead.

“The UK has entered a recession, consumer confidence is low, and a number of big name brands have recently announced they are exploring, or have entered, insolvency or restructuring procedures.

“This suggests the business climate will be challenging in the foreseeable future – and will not be made any easier as the Government support packages begin to wind down.”

He added: “Our members are telling us that it may not be long before companies which would be viable under normal circumstances begin to seek support from an insolvency and restructuring professional, as a result of the impact of the pandemic.”

Mr Cadman said that while the number of personal insolvencies currently remains low, a wave of business failures could have a knock-on effect if people lose their jobs or take on liability for a business’s debts as part of an unsuccessful attempt to turn it around.