The latest official corporate insolvency figures do not yet reflect the toll that the coronavirus pandemic is taking on regional businesses.
That’s the view of Alexandra Withers, North East chair of insolvency and restructuring trade body R3, after the Insolvency Service published its latest monthly report which shows that there were 778 corporate insolvencies across the UK during August, compared to 961 in July.
The August figure is just more than half of the number for the same month in 2019 (1,369).
But despite this drop, Alexandra Withers is warning that a significant upsurge in corporate insolvencies is most likely just around the corner.
She says: “The decrease in corporate insolvencies over August was driven by a drop in administrations and compulsory liquidations, but despite this news, there is no question that the pandemic is having an impact on regional businesses that is not yet being reflected in the insolvency figures.
“With a number of temporary Government measures aimed at reducing insolvency numbers set to come to an end soon, this situation may start to change before long.
“The Government’s support measures have provided vital protection for businesses and consumers, but as they begin to wind down and this crucial safety net disappears, we expect to see more requests for both corporate and personal insolvency advice and support.”
The Coronavirus Job Retention Scheme, under which one in three UK companies have put at least 75 per cent of their workforce on furlough, is due to come to an end on 31 October, with the Coronavirus Business Interruption Loan Scheme (CBILS) closing on 30 September.
Alexandra Withers, who is an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors in Newcastle, continues: “This is a worrying time for the UK, its economy and its business community. Unemployment is increasing, business debt is rising, and, despite growth in July, the economy is still nearly 12% below pre-pandemic levels.
“More big brands have announced cuts in staffing levels over the last month as they attempt to steer their way through the new landscape created by the pandemic, while many SMEs with staff on furlough may realise, when the scheme ends, that they are unable to sustain previous staffing levels, and will have to consider redundancies.
“Our members are saying that requests for advice and support are becoming less restructuring-focused than they were at the start of the pandemic, and that enquiries for formal insolvency support are growing in volume, although they are still lower than might have been expected.
“Insolvency and restructuring professionals expect enquiry levels to grow as the furlough scheme ends, and when CBILS loans become due for repayment early next year.
“Anyone concerned about their financial situation, whether on their own or their business’s behalf, should seek advice from a qualified professional as soon as the signs they might be in trouble begin to show themselves.
“Doing so will give them the best chance of turning their situation around, and both more options and more time on how they move forward.”