Administrations fall to historic low

The number of companies going into administration fell to historic lows during 2020, as the array of government COVID-19 support measures continue to provide a lifeline for businesses adversely affected by the pandemic.

Analysis of notices in The Gazette by KPMG’s restructuring practice showed that across the Midlands, 137 companies went into administration over the course of 2020, a drop of 21% compared to the 173 administration appointments in 2019.

This was particularly pronounced in H2, which saw a decrease in appointments of 38%. Building and construction was the hardest hit sector in the region, with 27 appointments during 2020, followed by business services and retail, both of which have been particularly hard hit due to the reduced workforce in offices in city centres.

There was a similar picture nationally, with 1,112 administration appointments over the course of 2020 – this is the lowest annual total since KPMG started tracking the data in 2005, and a fall of 22% on 2019, which saw 1,425 administrations.

Chris Pole, partner and head of restructuring for KPMG in the Midlands, said: “The breadth and depth of support measures available, coupled with a supportive lending community, have given organisations a vital lifeline. As a result, we have seen fewer insolvencies than expected from what will have been one of the most challenging years businesses have ever experienced.

“It is clear however that the low insolvency figures are simply masking the financial health of many businesses.  Much of the support provided has resulted in businesses taking on additional liabilities. At some point, the rent, tax deferrals and loans will need to be repaid, and the Job Retention Scheme will unwind. Life without these support schemes, particularly for businesses which need to rebuild their working capital, is going to be a significant challenge, especially when the additional repayments are taken into account.”