Q2 Insolvency statistics look promising – but do they tell the full picture?

The Insolvency Service have published their latest set of quarterly statistics covering April to June 2020.

Overall numbers of company insolvencies in England and Wales fell in Q2 2020 by 23% when compared with Q1 2020, and by 33% when compared with the same quarter in the previous year.

There were a total of 2,974 company insolvencies for the quarter – down from 3,848 from Q1 2020 and 4,425 from Q2 2019.

Whilst in ‘normal’ times this might be considered a cause for celebration, because these aren’t normal economic circumstances, they should be interpreted with caution rather than being taken as a sign that the economy has successfully weathered the coronavirus crisis.

Government measures

The reduction in company insolvencies was driven by government measures put in place in response to the coronavirus pandemic, including:

• Reduced operational running of the courts and reduced HMRC enforcement activity since UK lockdown which was applied on the evening of 23 March;
• Temporary restrictions on the use of statutory demands and certain winding-up petitions (leading to company compulsory liquidations) from 27 April and extended to 30 September 2020 under the Corporate Insolvency and Governance Act;
• Enhanced Government financial support for companies and individuals including the Coronavirus Job Retention Scheme (CJRS), Bounce Back Loans and various grants and other measures; and
• Financial service regulators have advised that individuals and businesses in financial difficulty should be treated with forbearance and due consideration.

These measures have provided time for some companies to take stock and have provided a short term safety net but businesses are by no means out of the woods. The furlough scheme is being wound up and the Eat out to Help Out scheme which provided a short term boost for the hospitality industry has now ended.

The whole retail industry is having to to come to terms with massively shifting patterns of behaviour which is already having a major impact on well established High Street brands such as Marks & Spencer and Debenhams and it faces an uncertain future.

What next?

As the level of government support is withdrawn, sadly, we expect to see a significant increase in the number of insolvencies in Q3 of 2020.

If you are concerned about the future of your business get in touch with us now. Our experienced team can work with you to look at what options are available to see your business through the rest of the year and beyond.