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R3 North East Response To New Corporate Insolvency Statistics


May 28, 2020

The Insolvency Service’s latest quarterly corporate insolvency statistics for England and Wales show an 8.5% fall in Q1 2020 compared to Q4 2019 and an 8.5% year-on-year drop compared to Q1 2019.

Commenting on the new figures, Alexandra Withers, North East chair of insolvency and restructuring trade body R3 and an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors, says: “The surprising decline in levels of corporate insolvency in Q1 2020 is partly reflective of the improving post-Election business climate, which was abruptly curtailed by the COVID-19 pandemic.

“However, the quarterly and year-on-year decrease in corporate insolvency numbers is highly unusual given the circumstances and climate, and very unlikely to last.

“The impact of the coronavirus on every aspect of the business world is hard to overstate, and almost all companies, from multinationals to microbusinesses, have been affected.

“Given the role of the courts in some corporate insolvency processes, as the Insolvency Service notes, the Q1 statistics may well have been artificially suppressed, to a degree, due to the curtailment of normal working hours by the courts. We may well see a backlog of cases coming through in future releases.

“Businesses have been affected by the continued uncertainty around Brexit and the future of the UK’s trading relationship with the EU, with some seeing a decline in demand from customers in Europe, while others have held off investing in staff, plant or stock until the landscape looks clearer.

“One unexpected silver lining, however, is that many companies maximised their working capital facilities with their banks and lenders before the departure date of 31 January, in anticipation of any Brexit-related disturbances to business patterns. This will provide a cash cushion that will be helping many to keep their companies afloat in the wake of the pandemic, and its huge impact on cashflow.

“Companies have adapted to the current supply and demand crisis: from forecasting cashflow and putting outgoings under the microscope, to setting up new ways of working for staff members where possible, to talking with suppliers, creditors and funders to try and find compromises or agree payment holidays, there are many ways that business owners have demonstrated their creativity and crisis management skills.

“Government support on an unprecedented scale has been offered to companies and employees via the employee support scheme, state-backed business loans and grants, the suspension of business rates, a VAT holiday, the suspension of evictions from commercial properties for non-payment of rent, and so on.

All of this is welcome, but it is clear that it will not have been enough to keep every company afloat, especially those which had entered the crisis period with existing debt problems.

“Many members of the insolvency and restructuring profession have changed their working practices as a result of the coronavirus, but despite that the profession stands ready to help, providing practical and immediate advice and support for directors facing circumstances unimaginable just a few short months ago.

“Seeking out a licenced and reputable insolvency and restructuring expert for their input and guidance on the best steps to take to protect a business may be the key to coming out the other side in a position to take advantage of any signs of economic recovery, so do not delay if your company has been impacted.”