Insolvencies are at a record low at a time when some industries have had their worst year in history.

Companies have had to increase their debt and struggle for a return to pre-Covid turnover before being able to even think about repaying those debts. A storm might just be brewing.

The Insolvency Service statistics in March 2021, comparing company insolvencies registered in March 2020 and March 2019 showed:

• Compulsory liquidations were 86% lower than 2020 and 90% lower than 2019;
• Creditors Voluntary Liquidations (CVLs) were 3% lower than 2020 and 23% lower than 2019;
• Company Voluntary Arrangements (CVAs) were 44% lower than 2020 and 66% lower than 2019; and
• Administrations were 44% lower than 2020 and 58% lower than 2019.

It’s fair to say that these record numbers have been largely driven by the temporary restrictions on the use of statutory demands and winding up petitions, as well as the enhanced government financial support for businesses. However, this only really tells half the story.

Failure is a part of success

There’s always an amount of natural attrition. A certain number of companies will fail each year. Entrepreneurs will have companies that just aren’t successful.

It’s great to see the success of the government support but a lot of companies that would have failed are being falsely propped up. Is this how the hundreds of billions of pounds were intended to help? Put frankly, the ‘can’ can’t be kicked down the road forever. There has to be a point where the inevitable conclusion is reached. This doesn’t mean these business owners can’t go on to have viable businesses in the future, of course.

Once the government support tails off, we might just see the flood gates open.

Continue to wait and see? Some will follow that path. Having a plan in place and being proactive is more advisable. Now is a great time to speak to someone for professional advice, to see what options are available for you and your business and consider next steps.

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