July 2021 corporate and personal insolvency statistics, R3 Southern and Thames Valley region response

Mike Pavitt
Mike Pavitt

Corporate insolvencies may have fallen slightly in July compared to June, but according to insolvency and restructuring trade body R3 in the Southern and Thames Valley region, July was also the third consecutive month in which year-on-year corporate insolvency levels rose substantially.


Responding to official statistics published by the Insolvency Service, R3 noted that the month on-month fall in corporate insolvencies was a result of a short term drop in Compulsory Liquidations, Creditors' Voluntary Liquidations, Administrations and Company Voluntary Arrangements but that the year-on-year rise continues to reflect the very real impact which the pandemic has had – and continues to have – upon the business community.
The statistics for England and Wales for July 2021, published on 17 August 2021, showed that corporate insolvencies fell by 9.3% to 1,094 in July 2021 compared to June’s figure of 1,206 but increased by 13.4% compared to July 2020's figure of 965.


Mike Pavitt, immediate past chair of insolvency and restructuring trade body R3’s Southern and Thames Valley region, said: “The month-on-month fall in formal corporate insolvencies was not unexpected. Formal insolvency numbers in past years have often fallen off somewhat during holiday periods and away from recurring triggers such as rent quarter and tax demands.


“However, the fact that year-on-year corporate insolvency numbers have continued to rise now for three consecutive months, despite continued restrictions on creditor action such as winding up petitions and historically low numbers of administrations and CVAs, is potentially a much more significant indicator for the business community.


“Within the overall increase, we have seen, tellingly, a comparatively huge 70.4% increase in Creditors' Voluntary Liquidations this month compared to July 2020, which confirms that the figures for May and June were no blip and that CVLs are right back up to pre-pandemic levels. Voluntary liquidations tend to be instigated by company management rather than creditors, and this suggests that an increasing number of directors have decided to close their businesses after spending well over a year trying to survive the pandemic.


“Whilst Government support has continued to provide a lifeline for many businesses which would otherwise potentially have failed in an economic climate like this, this July was still a very challenging month and business owners have known for some time now that this support will shortly be withdrawn.


“The delay in lifting the remaining trading restrictions will have hit footfall and spending predictions, meaning that a huge number of Southern and Thames Valley businesses will now have spent more than 15 months under conditions that were wildly different to normal, and have incurred reopening costs from which they have yet to see much benefit.”


Mike, who is Head of Corporate Restructuring and Insolvency at Hampshire solicitors Paris Smith LLP, added: “With the opening up of the economy, consumer confidence reportedly 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 and some will not be so confident that they can recover at all once the Government support has gone.


“SMEs are the backbone of the UK economy, but many in the South and Thames Valley have been badly affected by the pandemic, some irretrievably. Even with the economy growing again, patterns of trade have shifted and it will not be possible for every business to return to things precisely the way they were before the pandemic.


“Some will adapt better than others, and some will need more help than others. Most will have to deal carefully with some level of legacy debt resulting from the pandemic, whether in the form of deferred rent, taxes, loans or all of these. The restructuring community is better placed than ever to help 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 of course absolutely no shame at all in management seeking out support or advice – and R3 members are ideally placed to provide this. Many of them will offer a free initial consultation to businesspeople who want to know more about their restructuring or insolvency options, so they can better understand the situation their business is in and explore the potential solutions for improving it.


“Creditors and other stakeholders will rightly expect management to have taken appropriate advice at the right time so as to minimise the risks for all interested in the continued success of the business.”


For more information visit: July 2021 corporate and individual insolvency statistics for England and Wales

 

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