March insolvency statistics – This is the lull before the storm, says UK’s largest accountancy firm for SMEs
Duncan Swift restructuring and insolvency partners at Azets, comments on the March 2021 corporate insolvency statistics for England and Wales.
“We now have a full-year picture of the effects of the pandemic; and accompanying government support measures, on corporate insolvency volumes.
“Throughout the year, the number of corporate insolvencies has typically been 30%-40% below the prior year (2019). This trend continues to be reflected in the number (992) for last month (March 2021) that is 20% below March 2020; the start of the first lockdown, that was itself 22% down in volume on the prior year (March 2019).
“Clearly government support measures such as loans and suspension of creditor rights to enforce payment by debtor companies have helped many companies ride out the economic storm caused by the pandemic, including thousands of companies that were already financially weak before the pandemic started.
“This cannot go on forever. In past economic recessionary shocks, the greatest number of corporate failures happen immediately after; rather than before or during, as companies grapple with the twin challenges of rebuilding their business, whilst having to start to repay historic debt, which results in ‘over-trading’ relative to their available financial capital.
“This is the lull before the storm which is reflected in the low numbers of moratoriums (4) and restructuring plans (5) since these new tools were introduced by the Corporate Insolvency & Governance Act 2020 came into force (26 June 2020). Business owners need to act now to avoid tipping over the edge this year.”
