Corporate insolvencies were down by one third last month, compared to July 2019. Not what you would expect in the month before the UK entered into a recession for the first time in 11 years?

The reality is that over the last few months, the government has put measures in place to help prop up businesses who are struggling with the effects of the imposed lockdown. They have implemented a wide range of financial support measures to help prevent businesses from becoming insolvent and further prevent the knock-on effects. They have also placed temporary restrictions on the use of statutory demands and certain winding-up petitions.

However, there does seem to be an upturn in insolvencies showing when July’s figures are compared to recent months. The number of insolvencies in England and Wales increased by 29% in July 2020, compared to June 2020. Last month’s figure for compulsory liquidations was the highest since the implementation of the lockdown in March 2020. Perhaps the effect of the economic downturn on companies is starting to rear its head.

One thing to keep in mind when examining these figures, is that when the lockdown was imposed in March 2020, it inevitably had an effect on the timeliness of insolvency registration. The process was not able to progress as quickly and this had an effect on the number of insolvencies that took place during the lockdown months. As the courts have started processing the backlog of petitions (caused by the reduced operations in the lockdown months), the numbers of compulsory liquidations have increased.

The Bank of England’s chief economist Andy Haldane has predicted that Britain’s economy is on course for a rapid recovery. He has said that the foundations are laid for this recovery as lockdown restrictions are lifting.

It is hoped that this predicted economic upturn will come to fruition. However, this is by no means certain and the government’s support for businesses cannot continue indefinitely. In the coming months, government support will be withdrawn and companies will have to stand on their own feet again.

If you need advice on your company’s position with regards to the future withdrawal of government support, please get in touch with Farleys’ corporate insolvency team on 0845 287 0939 or contact us by email.