Q3 2020 England and Wales insolvency statistics, R3 response
R3 President Colin Haig responds to the publication of the Q3 2020 corporate and personal insolvency statistics for England and Wales:
Corporate insolvencies
“The corporate insolvency numbers in Q3 are lower than even the figures seen in Q2, after lockdown came into effect, and are another reminder that – whatever the impact of the pandemic on companies – it is yet to be fully seen in the insolvency statistics.
“The figures demonstrate that the support government has provided to businesses, from providing a range of emergency loans to suspending winding-up orders and stopping commercial evictions, is helping keep many companies afloat during this period of economic turbulence.
“The third quarter of the financial year has been hard for the UK, its economy and its business community. The ONS found that 18% of UK businesses said they are at moderate to severe risk of insolvency, with 38% – two in five – companies in the hospitality sector saying the same thing. There is clearly trouble on the horizon.
“Five months of economic growth have failed to make up the ground lost by the unprecedented 19.5% economic contraction in April, with GDP remaining 9.2% lower than it was prior to the pandemic. We’ve also seen a number of big brands announce restructurings or enter insolvency processes over the last quarter, as the pandemic affects their customer base and their income.
“Retailers, hospitality, manufacturing and the service sectors have all been hit – and while some of these have shown signs of recovering, others are still not where they were before Covid. With the winter drawing in and a second national lockdown looking increasingly likely, even as some areas are put into local lockdowns, the chances of this recovery continuing are uncertain at best.
“Our members are telling us that they have returned to receiving requests for insolvency and restructuring advice and support, after a flurry of requests for advice about the government’s support measures at the start of the pandemic.
“Looking ahead, the festive season is often the linchpin of the year for many companies, especially retail and hospitality businesses who build their business models around strong takings as people celebrate Christmas and other holidays. But this year, there is concern this model will not work as it has in the past, especially with limits on social gatherings, and curbs on travel to see family and friends. It remains to be seen how successful the chancellor’s Winter Economic Plan will be at reducing economic pain – or if it will only delay it.
“Despite the government’s efforts, there are likely to be a number of directors of businesses who are in a worrying position because of Covid – many of whom would have little cause for concern if the pandemic hadn’t happened, as their businesses would most likely have remained profitable.
“We would urge anyone who is in this position to seek advice from a qualified, reputable source as soon as they see signs their business is starting to struggle. The sooner you seek advice, the more options you have to potentially resolve your situation – and the more time you have to come to a considered decision about your future.
“Many R3 members offer a free consultation to people who are looking for help with their business finances and want to explore their options or understand how they might be able to resolve their situation.”
