Business insolvencies expected to surge by the end of this year

Sam Lyon, Head of Corporate and Commercial, notes that insolvency experts are expecting a large rise in the number of companies going out of business towards the end of the year. He would urge anyone who is concerned about the future of their own business, a customer or supplier to seek advice as early as possible. Doing so will give them more options about their next step and allow them to make a more considered decision about how they move forward.

The insolvency trade body R3 surveyed its members and found and that an overwhelming majority (93.7%) of respondents expect corporate insolvency numbers to increase.

More than half (56.1%) of the respondents expected corporate insolvency numbers to be significantly higher than in 2019, while 37.6% think they will be somewhat higher.

And out of those who said they expect numbers to rise, nearly six out of ten (56%) think the increase will happen in October-December 2020, while more than a quarter (26.3%) expect it to occur in January-March next year.

A spokesman for R3, said: “Despite the lockdown, the economic turmoil and the fall in GDP of more than 20% in April, corporate insolvencies in April and May actually decreased in comparison to the previous months, according to the government’s figures. 

“This is in no small part due to the government’s support measures, which have helped a number of businesses that would otherwise have struggled as a result of the pandemic.

“Our members also told us that during April and May, the enquiries they received were mainly around advice on companies’ eligibility for the state-provided relief packages, rather than formal insolvency support.

“However, it’s clear from the results of this survey that it’s a question of when, not if, corporate insolvency numbers increase, as the support available to businesses has deferred rather than deterred the rise in corporate insolvencies you would expect to see in an economic climate like this.

“We would urge anyone who is concerned about the future of their business to seek advice as early as possible. Doing so will give them more options about their next step and allow them to make a more considered decision about how they move forward.”

Respondents felt the main triggers for corporate insolvency advice over the next 12 months would be rent payments or arrears (61.7%), trade debts (49.7%), tax payments or arrears (48.1%), and wage payments (35.5%).

Nearly four in five respondents (79.8%) said pubs/bars would be the worst hit by the Covid-19 pandemic; a very similar proportion (78.7%) said restaurants; and 63.9% said tourism operators.

Hotels (40.4%) and retailers (31.1%) were also identified as likely to be affected.

Please contact Sam on 01228 585245 if you have any concerns about the impact of business insolvency on your business. These include the responsibilities of company directors, acquiring the assets of a failed business and help with debt recovery.