Fri, 24 Jul 2020
New insolvency figures for businesses and individuals could represent the “calm before the storm”, according to the R3 trade body for Newbury.
The Insolvency Service data from the Government shows corporate insolvency numbers declining between April and May.
The number of individual insolvencies increased, largely driven by a rise in the numbers of Individual Voluntary Arrangements (IVAs).
R3 – the insolvency and restructuring trade association – said that while the statistics provide a snapshot of how the pandemic is affecting businesses and consumers, they still do not provide a full account of the impact it is having on levels of insolvencies.
R3’s Southern and Thames Valley Committee chairman Garry Lee said: “The corporate insolvency figures show the Government Covid-19 support measures appear to be helping many businesses in Newbury that may otherwise have struggled during this period of economic disruption.
“This, in part, explains the drop in the number of businesses entering an insolvency process.
“There are also operational and logistical factors – such as the partial closing of the courts at the end of March – which also continue to play a role.
“On the personal insolvency side, while the numbers of Debt Relief Orders and bankruptcies have fallen, both compared with last month and with the same month last year, there was a sharp rise in IVAs.
“However, as the Insolvency Service notes, this increase has been strongly affected by technical issues around registering IVAs, so the new figures might not represent a true picture of personal insolvency levels in Newbury.”
Mr Lee, who is a senior manager in the recovery and restructuring services team at accountancy firm Smith and Williamson’s Southampton office, added: “Indicators over recent months suggest that an increase in insolvency numbers is coming, but this has not yet materialised.
“We are potentially in the period of calm before the storm, as indicated by the unprecedented 20.4-per-cent fall in GDP in April, published on June 12.
“For the first couple of months of lockdown, the insolvencies which took place were mainly those of companies which were already in financial trouble.
“It may not be long before this changes, however, and insolvencies of companies which would be viable under normal circumstances are initiated due to the lockdown and the effects of the pandemic.”
The new figures for England and Wales in May show a fall in corporate insolvencies from 1,198 in April 2020 to 944 in May 2020. This compares to 1,357 in May 2019.