Eleanor Temple, chair of insolvency and restructuring trade body R3 in Yorkshire and a barrister at Kings Chambers in Leeds, responds to today’s publication of November’s corporate and personal insolvency statistics for England and Wales:
“The increase in corporate insolvency numbers in November has been driven by a rise in Creditors Voluntary Liquidations (CVLs). However, Company Voluntary Arrangements (CVAs), Administrations and Compulsory Liquidations all fell compared to the previous month.
“Numbers of all types of personal insolvencies fell in November compared with October, leading to an overall month-on-month drop of over a fifth. The fall compared with the same month last year is less precipitous, however, with more IVAs registered last month than in November 2019. It is only a pronounced reduction in bankruptcies and Debt Relief Orders which meant there were 3% fewer individual insolvencies in November 2020 when compared with a year ago.
“Despite the small monthly increase in overall corporate insolvencies, the statistics published today are not an accurate reflection of the state of the economy or the state of the UK business community.
“Businesses and individuals from Land’s End to John O’Groats have been affected by COVID-19 and the only reason this hasn’t shown up in the insolvency statistics yet is because of the extensive support the Government has provided. Without it, we’d be in a very different situation – and a very grave one at that.
“The economy is still nearly 8% smaller than it was in February, unemployment has increased, and a number of big brands have entered insolvency processes or announced restructuring programmes in recent weeks.
“That said, the extension of the furlough scheme and the temporary ban on winding-up petitions until the end of March will provide some reassurance to many businesses and their staff as we go into the Christmas period and the first quarter of 2021.
“However, the effect of the various restrictions and lockdowns across the UK remains to be seen, and questions remain about the Government’s strategy for eventually winding down its packages of support and what will happen to those benefiting from these measures once they end.
“Against this backdrop, and with the clock ticking, continued uncertainty around the UK’s future trading relationship with the EU is one issue that many already struggling firms could do without.
“A good festive trading period has never been more important, but the impact of repeated stop-start closures in many sectors, and the disruption to usual pre-Christmas activities and events, mean that many companies will face a cold start to 2021.
“As we approach the end of this year, it becomes even more critical that company directors and individuals seek advice from a qualified source as soon as they see signs their business or their personal finances are starting to struggle. The earlier they seek advice, the more options they have to resolve their situation, and the more time they have to take a considered decision about how they move forward.”
