Insolvency and restructuring trade body R3 in Wales has warned that the economic damage caused by the pandemic is only now being reflected in levels of corporate insolvency – as Government figures show numbers are increasing.
The latest monthly insolvency statistics, which were recently published by the Insolvency Service, showed that corporate insolvencies in England and Wales increased in March 2021 to 992 – a 44.8% rise on February’s figure of 685.
Personal insolvency numbers increased to 10,941 in March 2021 – a 60.2% increase on February’s figure of 6,828, and were 40% higher in March 2021 than in March 2020 (7,815).
Philip Winterborne, chair of insolvency and restructuring trade body R3 in Wales and a Partner at Temple Bright LLP, comments:
“The economic damage caused by the pandemic is starting to show in levels of insolvency, but Government support has postponed rather than prevented the true picture being shown in insolvency levels to date.
“Twelve months ago, the economy was struck by the pandemic – and it is likely to be a long road to recovery. The monthly rise in corporate insolvencies comes after 11 months of relatively low levels of company insolvency procedures, as the Government’s support has provided many businesses with a vital lifeline and removed many of the traditional prompts and triggers for seeking financial advice.”
“As lockdown restrictions continue to unwind, there are reasons to be optimistic. Many businesses have adapted and reinvented themselves during the pandemic and may be in a better position for the coming months as a result.
“We may also see consumer spending increase, but companies need to be aware of the risks of over-trading if they don’t have the cashflow needed to cover the full costs of reopening and restocking. They need to plan for a sustainable reopening of their businesses.
“Unemployment is unsurprisingly higher than it was a year ago, and while many people have been able to save money during the pandemic, there are also a large number whose personal finances are precarious.
“The demand for workers in sectors gearing up for a return to pre-pandemic levels of work will offset some of the jobs lost in the companies worst-hit by Covid, but it will take some time for the economic and mental wellbeing of those who have been out of work to recover.”
Philip Winterborne concludes:
“The Government’s recent decision to extend a number of its temporary insolvency measures provides a window for anyone whose finances have been affected by the pandemic to plan for the future and explore how they can improve their situation. We urge them to take it – and to start by seeking advice about their options from a qualified source.”