R3's response to Q2 2021 England and Wales insolvency statistics

Corporate insolvencies have hit their highest quarterly total in 18 months, according to the R3 insolvency and restructuring trade body for the South and Thames Valley.

The increase may be partly due to some company directors opting to close their businesses before the situation deteriorates further.

The figures for the second quarter of 2021 – April, May and June – in England and Wales were more than 30% up on the first three months of the year.

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

• There were 3,116 seasonally adjusted corporate insolvencies in Q2 2021, an increase of 31.4% compared to Q1 2021's figures of 2,371. This was a rise of 4% compared to Q2 2020 (2,997).
• There were 27,622 seasonally adjusted individual insolvencies in Q2 2021, a fall of 4.3% compared to Q1 2021's figures of 28,895. This was a fall of 13.9% compared to Q2 2020 (32,134).

Garry Lee (pictured), chair of insolvency and restructuring trade body R3’s Southern and Thames Valley region, said: "The number of corporate insolvencies has reached the highest quarterly total in 18 months. This has been driven by a rise in Creditors’ Voluntary Liquidations, which have increased to pre-pandemic levels. 

"It’s hard to say what’s driving this increase in CVLs, but it could be that directors of a number of companies have decided they can no longer go on trading and are opting to close down their businesses by using the CVL process, before the situation deteriorates further."

Lee, who is an associate director in the recovery and restructuring services department at accountancy firm Smith & Williamson’s Southampton office, added: "What is clear is that the figures show the toll the challenges of the last three months – and the twelve before them – have taken on the business community. Looking ahead to the next quarter, the picture appears to be more positive for businesses in the south and Thames Valley. The economy is continuing to recover. 

"The IMF has predicted it will grow by 7% this year, consumer spending is now above 2019 levels and people are more optimistic about their personal finances. With the removal of the final Covid restrictions and the vaccine rollout continuing, there’s a chance many businesses may be able to return to near normality again – although some sectors in the south and Thames Valley will take longer to get to this point."

The decrease in personal insolvencies in Q2 was driven by a fall in numbers of Individual Voluntary Arrangements and bankruptcies, although Debt Relief Order numbers increased.

Lee said: "This could well be a sign that the Breathing Space Scheme introduced in May of this year is delaying people from having to enter a personal insolvency process when they previously would have done.

"With 11,747 people making use of the Breathing Space up until 30 June, there is clearly a significant demand for this scheme but whether this prevents more people from entering a personal insolvency process or delays their entry into one is too early to tell."