Administrations fall to historic low

The number of companies going into administration fell to historic lows during 2020, as the array of government COVID-19 support measures continue to provide a lifeline for those businesses which have been adversely affected by the pandemic.

Analysis of notices in The Gazette by accountants KPMG showed that 109 companies went into administration in the South West in 2020, compared to 149 in 2019; a drop of 26.8 per cent.

Nationally 1,112 companies went into administration over the course of 2020 – this is the lowest annual total since KPMG started tracking the data in 2005, and a fall of 22 per cent on 2019, which saw 1,425 administrations.

In the South West*, manufacturing (14), construction and building development (12), and retail (7) accounted for the lions’ share of insolvencies.

Sarah Collins, Restructuring Lead for KPMG in Bristol, said: “Comfort can be taken from the fact that fewer businesses than expected have been forced into insolvency during the crisis, as the breadth and depth of support measures available, coupled with a supportive lending community, have given organisations that vital lifeline.

“We also know that there are a number of sectors, including the likes of tech, online retail and financial services, which have seen something of a COVID-bounce.

“We need to be clear, however, that these figures provide a distorted view of reality.  Those businesses that remain in hibernation due to ongoing lockdown measures, such as those in the leisure and hospitality and travel and tourism sectors, continue to accrue liabilities while seeing precious little cash flow into the business. At some point, rent and tax deferrals and loans will need to be repaid. The Job Retention Scheme will unwind. Weaning off these support schemes is going to be a massive challenge for many.”

While the pandemic and resulting lockdown measures continue to have ramifications for many businesses, the impact of the UK’s new deal with the European Union has also come into focus.

Sarah explains: “There was certainly a collective sigh of relief when a Brexit deal was signed on Christmas Eve, with the UK avoiding a damaging cliff-edge scenario. But as businesses now grapple with the realities of our new trading relationship, there inevitably will be some bumps in the road.

“Some sectors are seeing an immediate impact on cash and liquidity. There have been early signs of disruption across supply chains, particularly on roads and at ports as customs changes, increased paperwork and delays start to have a knock-on effect on both suppliers and those awaiting deliveries. This leaves some companies with the issue of having cash tied up in stock, unable to be despatched to consumers, but with bills still to be paid and no obvious solution on the horizon.”

 * The South West region is defined as the area to the South West of London, from the Thames Valley to Cornwall. It includes Reading, Southampton, Eastleigh, Salisbury, Bristol, Bath and Taunton.

Bristol-based businesses that went into insolvency in 2020