Insolvency statistics and what they show – are they hiding the real picture?

The latest quarterly insolvency statistics were published on 30 July 2020, by the UK Insolvency Service.

They show various trends – the standout points are:

• The number of company going into insolvency was down by 23% – when compared with the previous quarter, and by 33% when viewed against the relevant quarter in 2019.
• It is also not surprising to find out from the figures that the construction industry, the accommodation and food services industry (hotels and restaurants) were the industries that were hit hardest in the last quarter.

Whilst I suspect that the falling number of insolvency events is not at all surprising to those who have paid attention to the wide range of support measures that the government has put in place since the beginning of the Covid-19 pandemic, the most interesting thing to consider is the commentary from the Insolvency Service who confirmed that, in their opinion, “caution needs to be applied when interpreting these statistics”.

The Insolvency Service went on to suggest that Covid-19 may have had some effect on the timeliness of insolvency registration. This is a suggestion that makes complete sense – on the basis that the government’s financial assistance has been propping up companies that would have otherwise failed.

This means that the increase in companies falling into insolvency will almost inevitably come but, in all likelihood, not until after the government’s supportive measures have come to an end.

The Insolvency Service believe that the pandemic has led to businesses behaving in a different way with, as a knock on, the insolvency industry – from insolvency practitioners, through to the courts themselves – not being capable of dealing with insolvencies “in the usual manner”.

As the next quarter’s statistics will still, in all likelihood, be skewed by the impact of the Covid-19 pandemic and the government’s substantial financial package that is still actively supporting businesses as they continue to try and keep trading – it will not be until the first, or possibly even the second quarter of 2021 until we see the real picture emerging.

Contact our Insolvency lawyers in Sevenoaks, Ashford, Uckfield, Brighton & Hove and Seaford

If you are a company director and are concerned as to the potential impact of the Covid-19 pandemic and whether you may be facing insolvency with your business either now or in the short-term future, as the government support funding wears off, please contact Richard Ludlow in our insolvency and restructuring team to discuss how we can assist you and your business. e richardludlow@rixandkay.co.uk t. 01732 441695