Christina Fitzgerald, Vice President of insolvency and restructuring trade body R3, responds to the publication of the March 2021 corporate and individual insolvency statistics for England and Wales:
“The monthly rise in corporate insolvency numbers shown in the figures published today has been driven by an increase in Creditor Voluntary Liquidations and administrations, while Company Voluntary Arrangements also increased.
“On the personal insolvency side, all three kinds of procedure increased in number compared with the previous month, while the year-on-year increase is down entirely to Individual Voluntary Arrangements, with bankruptcies and Debt Relief Orders still notably lower than this time last year.
“The economic damage caused by the pandemic is starting to be reflected in levels of insolvency, but Government support has postponed rather than prevented the true picture being shown in insolvency levels to date.
“Twelve months ago, the economy was struck by the pandemic – and it has yet to fully recover. 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.
“As lockdown restrictions continue to unwind, there are reasons to be optimistic. Many businesses have adapted and reinvented themselves during the pandemic and may be in a better position for the coming months as a result.
“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. They need to plan for a sustainable reopening of their businesses.
“Unemployment is unsurprisingly higher than it was a year ago, and while many people have been able to save money during the pandemic, there are also a large number whose personal finances are precarious.
“The demand for workers in sectors gearing up for a return to pre-pandemic levels of work will offset some of the jobs lost in the companies worst-hit by Covid, but it will take some time for unemployed people’s economic and mental wellbeing to recover.
“The Government’s recent decision to extend a number of its temporary insolvency measures provides a window for anyone whose finances have been affected by the pandemic to plan for the future and explore how they can improve their situation. We urge them to take it – and to start by seeking advice about their options from a qualified source.”