Home Finance & Investments July 2021 monthly insolvency statistics, R3 response

July 2021 monthly insolvency statistics, R3 response

Eleanor Temple, Chair of insolvency and restructuring trade body R3

Eleanor Temple, chair of insolvency and restructuring trade body R3 in Yorkshire and a barrister at Kings Chambers in Leeds, responds to Tuesday’s publication of the July 2021 corporate and individual insolvency statistics for England and Wales:

“The month on-month fall in corporate insolvencies was as a result of a drop in Compulsory Liquidations, Creditors’ Voluntary Liquidations, Administrations and Company Voluntary Arrangements.

“However, this is the third consecutive month in which year-on-year corporate insolvency levels have risen, which reflects the effect the pandemic has had on the business community.

“The 70.4% increase in Creditors’ Voluntary Liquidations this month compared to July 2020 suggests an increasing number of directors have decided to close their businesses after spending a year trying to survive the pandemic.

“Although Government support has continued to provide a lifeline for many businesses which would have otherwise struggled in an economic climate like this, this July was still a challenging month.

“The delay in lifting the final restrictions will have hit trading, footfall and spending, and a huge number of firms have spent 15 months trading in conditions that are wildly different to normal.

“With the opening up of the economy, consumer confidence at pre-pandemic levels, and spending levels higher than they were in 2019, the future does look more optimistic. Having said that, it will take longer for the worse-hit sectors to recover from the pandemic.

“SMEs are the backbone of the UK economy, but many have been badly affected by the pandemic. The restructuring community is better placed than ever to help them and other organisations with financial worries, but if directors leave it too late to ask for help, they will have fewer rescue or recovery options open to them.

“There is no shame in management asking for support or advice – and R3 members are ideally placed to provide it. Many of them will give an hour’s free consultation to firms that want to know more about their restructuring or insolvency options, so they can understand the situation the business is in and explain the potential solutions for improving it.

“On the personal insolvency side, the month-on-month fall shown in the figures published today was as a result of a fall in Bankruptcies and Individual Voluntary Arrangements, although Debt Relief Order numbers increased.

“However, it’s worth highlighting that personal insolvency levels increased year-on-year in July, which shows the toll the pandemic is taking on people’s finances in England and Wales.

“While the majority of COVID support measures are coming to an end, the introduction of the Breathing Space scheme in May has given more than 17,000 people who are in financial difficulty the chance to discuss the challenges they face with a debt advisor, free from creditor action, since it launched. This recent development may be a further support for those who suffered financially during the pandemic.

“As we enter the middle of the summer, employment numbers and job vacancies have increased, and more people are returning to work as the furlough scheme begins to wind down. However, not everyone has benefitted from Government support, and many people have had to borrow or use their savings to pay their bills.

“We recognise that there are a huge number of people who are worried about their finances right now, and the best thing they – or anyone who is worried about their personal or business finances – can do is to seek advice.

“It’s a really tough thing to talk about, but discussing your financial concerns as they emerge or in their early stages means you have more potential solutions open to you and more time to determine which of these is best for you.”