Pre Pack Administration

The Latest Corporate Insolvency Statistics – Monthly to September 2020 Comparing post-covid to pre-covid

The Insolvency Service have released the latest insolvency statistics which show the monthly corporate insolvencies for England and Wales and it makes for interesting reading.

If I had £1 for every person who told me “I bet you’re busy at the moment” I think I could have retired early. However, the reality is that in the 6 months post-Covid, corporate insolvencies are 34.64% down than in the same 6 month period in 2019 (April-Sept). Of this, CVL’s are down from a 6-month average of 1008 per month in 2019 to 706 per month in 2020, being a 29.97% drop, Administrations are down from a 6-month average of 145 per month in 2019 to 129 per month in 2020, being an 11.04% drop and CVA’s are down from a 6-month average of 31 per month in 2019 to 19 per month in 2020 being a massive 38.71% fall.

In September 2020 the total corporate insolvencies amounted to 926 (742 being CVL’s) whereas in September 2019 the total corporate insolvencies amounted to a massive 1513 (with 1099 being CVL’s)

So, what does this tell us…?

This could mean a number of things, firstly, it could well mean that the government incentives (loans, grants, furlough monies and all else on offer) are doing the trick and that they has saved our failing businesses. Or, and what is far more likely, could mean that everyone has taken the incentives on offer and are probably in need of a corporate insolvency process but as there there is currently a stay on issuing winding up petitions and as little is being done to close down failing businesses (because many are in the same boat) the inevitable is simply just being delayed.

It would appear that CVA’s are the most affected, this is simply due to the fact that most businesses that are struggling are already in a sort of informal CVA, agreeing repayment plans themselves and doing deals to delay the payment of their debt. Or perhaps they have paid off their debt with the bounce back loans or CIBILS obtained and no longer need a CVA as their debt is now consolidated, buying them time to delay some decisions.

Admins appear relatively unaffected as unfortunately, those bigger businesses, who need this type of process because of their higher value assets and more complex setups, still need this process to restructure, allowing for loss making areas of their businesses to be closed down and profit making areas to be rescued.

For those who would like to see the statistics by process, or by month, you can click here for a link to the data.

https://www.gov.uk/government/statistics/monthly-insolvency-statistics-september-2020

For any of you who have read this article and think that you may be one of the companies in need of help, but have yet to take action. Don’t worry, this should be reassurance that you’re not alone, and the reality is that you probably have even more time, now that the furlough scheme has been extended through to March 2021. My advice would be to try to do the following:-

  1. Pay your debts as and when they fall due, taking care not to make preference payments to some creditors and not pay others.
  2. Keep a record of the decisions made to continue to trade and support this with cash flow statements which demonstrate why you believe you can turnaround the business as insolvent trading will be reviewed if Liquidation or Administration cant be avoided at a later date.
  3. Take care not to worsen the position for any particular creditor. If one creditor suffers disproportionately to others you will be held accountable.
  4. If you are ever unsure, take advice, or consider ceasing to trade.

You can contact me (Ben Robson) on 01788 544 544 for more information or advice.

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