The latest set of official business insolvency figures don’t yet show the true economic impact of the coronavirus pandemic.
That’s the view of Alexandra Withers, North East chair of insolvency and restructuring trade body R3, who was commenting after the Insolvency Service published its first monthly report on business insolvencies in England and Wales, as opposed to the usual quarterly data that has been released previously.
The report shows a small drop in the number of new corporate insolvencies between March and April, with a figure of 1,234 cases for the former being followed by 1,196 in April.
Factors influencing the unexpected fall include ongoing insolvency procedures being halted because of the pandemic, other delays within the court system before the lockdown and the schemes introduced by the government to support businesses hit by Covid-19.
Alexandra Withers, who is also an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors, says: “The first set of monthly figures do not yet provide a particularly clear picture of how the pandemic is affecting business insolvencies.
“Nevertheless, we welcome the decision to publish figures for insolvencies every month for the period of the pandemic, as these numbers will give more immediate feedback on how businesses, consumers and the wider economy are being affected.
“Our members are telling us the enquiries they’re receiving are mainly for advice and support, rather than necessarily for COVID-induced insolvency processes. Directors want to understand how to manage their cashflow, what options are open to them operationally and what the finer points of the Government’s support measures mean for their particular circumstances.”
Of the new insolvencies recorded in March, 1,027 occurred before the 23 March lockdown, with a further 207 following in the remainder of the month.
Alexandra Withers continues: “The figures show corporate insolvency numbers fell very slightly between March and April, but this is very much the calm before the storm, and as the Insolvency Service notes, there are several complicating factors at play.
“Some corporate insolvency procedures take time to get underway, while the changes to the normal operating of the courts have meant many civil proceedings have been halted.
“The Government’s support measures and policies for businesses and individuals have undoubtedly helped many stay afloat, while companies which had planned for disruption in the case of a no-deal Brexit may find their preparations coming in handy to tackle disruption from a different source.
“The corporate insolvency procedures which have been initiated since the pandemic hit, meanwhile, mostly involve companies which were already in financial distress before the lockdown, for whom the freezing of normal operations delivered a final blow.
“Now more than ever, any owner/managers worried about their company’s financial situation should seek advice urgently from a professional and reputable source. With ‘business as usual’ an unknowable way off, proactively making plans to navigate the disruption the pandemic has caused is vital.”