First monthly business insolvency figures mask true impact of pandemic, says R3

The latest set of official business insolvency figures released by the Insolvency Service do not yet show the true economic impact of the coronavirus pandemic, according to R3.

Alexander Withers, who is North East chair of the insolvency and restructuring trade body, described the latest figures as “the calm before the storm.”

The Insolvency Service recently published its first monthly report on business insolvencies in England and Wales, as opposed to the usual quarterly data that is normally released.

The report shows the number of new corporate insolvencies actually dropped between March and April, with a figure of 1234 being followed by 1196 in April – a reduction of 38 month-on-month.

Factors influencing the unexpected fall include ongoing insolvency procedures being halted because of the pandemic, other delays within the court system before the lockdown and the schemes introduced by the Government to support businesses that might have gone become insolvent otherwise.

Alexandra Withers, who is also an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors, said: “The first set of monthly figures do not yet provide a particularly clear picture of how the pandemic is affecting business insolvencies.

“Nevertheless, we welcome the decision to publish figures for insolvencies every month for the period of the pandemic, as these numbers will give more immediate feedback on how businesses, consumers and the wider economy are being affected.

“Our members are telling us the enquiries they’re receiving are mainly for advice and support, rather than necessarily for COVID-induced insolvency processes.

“Directors want to understand how to manage their cashflow, what options are open to them operationally and what the finer points of the Government’s support measures mean for their particular circumstances.”

Of the new insolvencies recorded in March, 1027 occurred before the March 23 lockdown, with a further 207 following in the remainder of the month.

Alexandra continued: “The figures show corporate insolvency numbers fell very slightly between March and April, but this is very much the calm before the storm, and as the Insolvency Service notes, there are several complicating factors at play.

“Now more than ever, any owner/managers worried about their company’s financial situation should seek advice urgently from a professional and reputable source.

“With ‘business as usual’ an unknowable way off, proactively making plans to navigate the disruption the pandemic has caused is vital.”