South East: R3's reaction to new insolvency figures

New insolvency figures have sparked a warning for businesses and individuals in the south and Thames Valley.

R3, the trade body for restructuring and insolvency professionals, says that ‘now is the time’ to plan ahead for the anticipated phasing-out of government support as the covid crisis eases.

The plea comes after new statistics from the insolvency service revealed significant decreases in February for England Wales:

• Corporate insolvencies fell by 9% to 686 in February 2021 compared to January’s figure of 754. They were 49% lower than February 2020’s figure of 1,348.
• Personal insolvencies fell by 18% to 6,816 in February 2021 compared to January’s figure of 8,321. They were 21% lower than February 2020’s figure of 8,574.

Garry Lee, chair of the R3 Southern and Thames Valley region, said the statistics failed to reflect the severity of the pandemic’s impact.

"The fall in corporate insolvency numbers shown in the figures published today has been driven by a reduction in all corporate insolvency processes, while the month-on-month reduction in personal insolvencies is down to a slump in individual voluntary arrangement numbers. However, it’s worth noting that both bankruptcies and debt relief orders – which may be indicators of more severe debt levels than IVAs, which tend to be more market-driven – rose by 14% compared with the previous month.

“Despite the fall in insolvencies, February continued to be tough for businesses, individuals and the economy in the south and Thames Valley. The national lockdown meant people weren’t able to celebrate Christmas and New Year as they have traditionally, which will have hit a crucial trading period for many businesses, and had an impact on their success – and in some cases, survival – through the first quarter of this year.”

Lee, who is an associate director in the recovery and restructuring services department at accountancy firm Smith & Williamson, added: “Government support has been and continues to be a lifeline for many. However, it has stemmed rather than stopped the flow of insolvencies we would expect to see in this kind of economic climate.

“In addition, the usual ‘trigger points’ for action, such as winding-up petitions or repossession notices, are out of the picture at the moment. Our members say that many company directors are putting off examining their options as a result.

“Now is the time for them to make the most of the Government’s decision to extend its support packages and plan ahead for when these measures end, and for anyone worried about their personal or business finances to seek advice from a qualified, regulated source about resolving their situation.”