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R3 Wales Warns Latest Government Insolvency Statistics

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Another monthly fall in the number of corporate insolvencies should not be taken as a sign that all is well for businesses, warns the Wales branch of insolvency and restructuring trade body R3.

The insolvency statistics for June, published by the Insolvency Service, show that there were 732 company insolvencies in England and Wales in June 2020, lower than the figure for May 2020 (945) and a 50% drop compared to the number for June 2019 (1,465). The decrease in the number of corporate insolvencies in June was driven by a sharp reduction in the number of Creditors’ Voluntary Liquidations, and a drop in administrations and compulsory liquidations.

R3 in Wales’s Chair Philip Winterborne, a partner at Temple Bright solicitors, said:

“The statistics still do not reflect the harm that the pandemic is wielding on businesses due to two key factors: the time lag between setting up and entering corporate insolvency processes, and the Government’s valuable safety net of business support measures.

“In reality, the economic contraction in April and May shows that consumer spending had halted, and consumer confidence was unsurprisingly low during both months, with no real improvement in June. Business owners are naturally worried about the health of the economy over the next year and, ultimately, about their own financial survival.”

According to latest R3 research among members of the insolvency profession, there has been a significant increase in existing and new clients requesting support with managing reduced demand for their products and services. Clients are also asking for guidance around how they can manage working capital shortages in cashflow forecasts.

Philip Winterborne added:

“The situation is still tough for many people, with little sign of economic improvement on the horizon. Anyone experiencing problems with their business or personal finances should seek advice from a qualified source as early as they possibly can.”

Business News Wales