R3 President Colin Haig responds to 15 September 2020 publication of the August corporate and personal insolvency statistics for England and Wales:
“The decrease in corporate insolvencies over August 2020 was driven by a drop in administrations and compulsory liquidations, while the fall in personal insolvencies is driven by a reduction across each of the three main personal insolvency processes (bankruptcies, Debt Relief Orders and Individual Voluntary Arrangements).
“Despite today’s news, there is no question that the pandemic is taking its toll on businesses and individuals, but this impact is not being reflected in the insolvency figures, yet. With a number of temporary Government measures aimed at reducing insolvency numbers set to come to an end on 30 September, 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 personal and corporate insolvency advice and support.
“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. This, coupled with contraction in the services sector, and manufacturing and construction still well behind their pre-pandemic state, means it is a tough time for British businesses.
“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 – which may be expensive, as well as deeply upsetting for all those affected.
“People are worried about the economy – and about their own financial situations. Consumer confidence remains low, as does people’s optimism about their financial future, even though borrowing and spending have increased recently.
“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 show themselves. Doing so will give them the best chance of turning their situation around – and more options and more time to take a decision on how they move forward."
To support businesses and individuals affected by the economic consequences of the pandemic and highlight the importance of seeking early advice, R3 has formed a new committee of senior insolvency and restructuring professionals, the Back to Business UK Committee.
This committee will work with R3’s team to help produce guides on the profession, its processes, and the benefits of seeking early advice and help educate a range of audiences about insolvency and restructuring, how it can help businesses and individuals turn their financial situation around, and the contribution it makes to the UK economy.
Colin Haig says: “It’s likely that more people are going to need insolvency and restructuring advice and support. We hope this committee’s work will encourage business owners and individuals to seek advice as early as they can rather than waiting until later and limiting their options for improving their situation.”