R3's response to June insolvency statistics

Corporate insolvencies have hit their third highest monthly total since the start of the pandemic, according to the R3 insolvency and restructuring trade body for the south and Thames Valley.

R3 said that the delay in the lifting of restrictions may have contributed to the rise and urged businesses and individuals with financial concerns to seek support earlier rather than later.

The statistics for June 2021 from the Insolvency Service for England and Wales showed: 

• Corporate insolvencies increased by 19% to 1,207 in June 2021 compared to May’s figure of 1,014. They rose 62.9% compared to June 2020's figure of 741

• Personal insolvencies rose by 15.8% to 9,836 in June 2021 compared to May’s figure of 8,497. They were 18.8% higher than June 2020's figure of 8,282.

Garry Lee (pictured), chair of insolvency and restructuring trade body R3’s southern and Thames Valley region, said: "The increase in corporate insolvencies between May and June – to the third highest monthly figure since the pandemic started – has been driven by a rise in Creditors’ Voluntary Liquidations (CVLs).

"The Government’s decision to delay lifting the final Covid restrictions for another month has clearly been a further blow to the business community and may have been particularly unhelpful for the hospitality and retail sectors, which have been hit hardest by trading restrictions and lockdowns and are likely to have incurred additional costs in anticipation of opening. 

"It may be that this impact has been reflected in the latest statistics as the rise in CVLs, used by directors to voluntarily close a company, suggests that for many directors the delay to the removal of the restrictions may have simply made it uneconomic to continue trading."

Lee, who is an associate director in the recovery and restructuring services department at accountancy firm Smith & Williamson’s Southampton office, added: "However, we were heartened by the Business Secretary’s recent comments on HMRC’s planned approach to working with distressed businesses. In particular, the news that HMRC will take a supportive approach to rescue proposals from viable businesses is welcome, and we hope will support the profession’s efforts to support Covid-hit firms."

The highest number of corporate insolvencies in any month since the start of the lockdown was 1,237 in December 2020. The next highest was 1,235 in March 2020. The rise in personal insolvencies in June 202 can be attributed to an increase in Individual Voluntary Arrangements.

Lee said: "When it comes to personal insolvency, the figures show the damaging effect of the pandemic on people’s personal finances and their financial health. While the pandemic has led to many people repaying their debts and boosting their savings, others have borrowed more, used their savings to cover a shortfall in income, or deferred paying certain debts. It’s these people who are financially vulnerable as things tentatively return to normal – and may be one unexpected shock away from running into trouble."

Lee added: "Anyone who is concerned about their finances in the south and Thames Valley – either business or personal – should seek advice from a qualified and regulated source as soon as possible. Taking the initiative, rather than avoiding the issue, will mean you have more options open and more time to consider your next step."

About R3

R3 is a trade association for the UK’s insolvency, restructuring, advisory, and turnaround professionals. It represents insolvency practitioners, lawyers, turnaround and restructuring experts, students, and others in the profession.

R3 comments on a wide variety of personal and corporate insolvency issues. R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.