- UK Insolvency Statistics: Q2 2020
UK Insolvency Statistics: Q2 2020
UK Insolvency Statistics: Q2 20207th August 2020 - Published by Richard Palmer
Head of Restructuring & Insolvency, Richard Palmer, gives his expert insight into what the latest insolvency statistics mean.
The Insolvency Service released its Q2 2020 statistics last week. The Insolvency Service has recently started providing monthly insolvency updates as well which may show trends (subject to the fact that they are on a designated basis).
There were 2,974 new company insolvencies in Q2 2020; this is down by 1/3 when compared with Q2 2019. It is the lowest number of corporate insolvencies in at least a decade. The corporate insolvency statistics are available here.
Even with a GDP fall of 20.4% in April, all types of corporate insolvency fell. Unsurprisingly (with the substantial restrictions on winding up petitions), there was a 72% drop in the numbers of compulsory liquidations from Q1 2020 (from 707 to 195). The monthly statistics for June 2020 (here) show 61 compulsory liquidations in June 2020. I wonder how many of the 195 (and in particular the 61 for June) are void under the Corporate Insolvency and Governance Act 2020 (which declares that orders made that would not have been made if the Act had been in force on these terms are void). I would envisage these falling further until the restrictions in the Act are at least relaxed.
Administrations and voluntary liquidations fell less dramatically (3% and 12% from the Q1 numbers respectively). Companies have access to substantial financial support at the moment and directors are not subject to the threat of personal liability wrongful trading (for the current period) so this will have given many directors the comfort to continue. I would envisage that with the immediate costs of many businesses going up as furlough is tapered to a conclusion that these figures may rise slightly in Q3.
The fall in CVA numbers was a slight surprise given the use of CVAs by retail and leisure businesses to mitigate property costs. Going forward, there were a number of CVAs in the retail and leisure sectors in the process with effective dates in July 2020, and so I don’t think it is dramatic for me to predict a significant increase in the numbers of CVAs at least in Q3 from the 47 in Q2 2020 (there were 92 in Q2 2019, for example).
They don’t yet include statistics related to the new procedures (the moratorium or the cross-class cram down) but these are to be incorporated into future releases. These only passed 4 days before the end of Q2 2020 so this isn’t surprising. I will be interested to see what sort of situations these will cater for; the statistics may be able to provide some early insight.
A sharp increase in IVAs saw the number of individual insolvencies increase by 12% from Q1 2020, going up to 32,153 in total. IVAs formed 24,932 of these. The individual insolvency statistics are available here.
So, why was there a 42% increase in IVAs in the period? Intuition would have expected the number to fall: 2.7m people had used payment holidays on mortgages and credit cards. In addition, £7.4bn net of consumer credit was repaid in April, the largest net repayment on record. Perhaps people were using lockdown to rectify issues in their finances. Perhaps more are being approved by creditors because of increasing uncertainty.
There are no Covid-related restrictions on the use of bankruptcy petitions, yet there was a reduction of 44% in the number of bankruptcies from Q1 2020. The Insolvency statistics noted reduced operational running of the courts and reduced HMRC enforcement activity which may explain this.
Get in touch with an insolvency solicitor
If you would like advise on anything mentioned above, please contact Richard Palmer, head of restructuring and insolvency on 0161 503 2996