There were 1,348 registered company insolvencies in August 2021, according to figures released by the Insolvency Service – 71% higher than in the same month in the previous year, but 1% lower than the pre-pandemic figure in August 2019.
August 2021 saw 1,256 Creditors’ Voluntary Liquidations (CVLs), the highest level seen since January 2019, more than double the number in August 2020 and 30% higher than in August 2019. Other types of company insolvencies, such as compulsory liquidations, remain comparatively low, driven in part by temporary restrictions on the use of statutory demands and certain winding-up petitions, and enhanced financial support for companies and individuals, the Insolvency Service said.
Restrictions imposed during the pandemic that prevent companies from serving winding-up petitions against debtors will ease after this month, the government stated last week.
For individuals, 614 bankruptcies were registered – 22% lower than August 2020 and 54% lower than August 2019.
Too early to call it a trend
While a rise in insolvencies was inevitable as support measures such as the furlough scheme come to an end, it’s too early to call this a trend according to Bob Pinder, Director, Quality Assurance, Professional Standards at ICAEW.
“It’s a fine balance at the moment for businesses,” said Pinder. “In some ways, it’s a tougher climate than August 2020 because of the winding down of government support, and there will be some businesses that have struggled through 18 months exiting now due to factors such as rising costs or staff shortages.
“However, it’s the first set of numbers that shows a distinct rise in insolvencies, so it’s too early to draw many conclusions at the moment. Our advice for business or individuals is always to take advice early from a qualified individual – that way you’ll have more options,” concluded Pinder.
Colin Haig, President of insolvency and restructuring at trade body R3, commented that the increase in corporate insolvencies was driven by a rise in Creditors’ Voluntary Liquidations.
“Numbers for this were 115% higher than this time last year and 30% higher than in 2019,” said Haig, “which suggests that despite the opening up of the economy, there are a number of company directors who are opting to close their businesses after a year and a half of trading in a pandemic.”
Read more on ICAEW’s dedicated Business Rescue page
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