Corporate insolvencies start to rise as pandemic takes its toll

A notable monthly increase in corporate insolvencies indicates the negative impact of the pandemic on businesses – but the ability of companies to reinvent themselves over the past 12 months should give cause for economic optimism.

This is according to the Midlands branch of insolvency and restructuring trade body R3 and comes on the back of latest figures published by the Government’s Insolvency Service showing that corporate insolvencies in England and Wales increased by 44.8% to 992 in March, compared to February’s figure of 685.

The monthly rise in corporate insolvencies, comes after 11 months of relatively low levels of company insolvency procedures, as the government’s support has provided many businesses with a vital lifeline and removed many of the traditional prompts and triggers for seeking financial advice.

R3 Midlands chair Eddie Williams, a partner at PwC in Birmingham, said: “The economic damage caused by the pandemic is only now starting to be revealed, as Government support has postponed, rather than prevented, the true picture being reflected in rising  insolvency levels.

“As lockdown restrictions continue to unwind, however, there is some cause to be optimistic. Many businesses have adapted and reinvented themselves during the pandemic and may now be in a better position for the coming months.

“We may also see consumer spending increase but companies need to be aware of the risks of over-trading if they don’t have the cashflow needed to cover the full costs of reopening and restocking. It is crucial that directors and owners plan for a sustainable reopening of their businesses.

“For those companies continuing to struggle, 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.”