The Insolvency Service published its quarterly insolvency statistics for the period January to March 2021 (Q1 2021) on 30 April 2021. By way of comparison, see our previous update on the Q4 2020 statistics here.
The published statistics for the first quarter of 2021 continue the downward trend seen in the previous 12 month period, with company insolvencies falling overall by 22% from the previous quarter.
Comparing Q1 2021 with the previous quarter (Q4 2020):
- Compulsory liquidations (i.e. court-ordered liquidations) fell by 26%
- Administration appointments fell by 44%
- Company voluntary liquidations (CVLs) fell by 18%
- Company voluntary arrangements (CVAs) fell by 54%
Comparing Q1 2021 with the same quarter last year (Q1 2020), the contrast is even starker:
- Compulsory liquidations fell by 85%
- Administration appointments fell by 52%
- Company voluntary liquidations (CVLs) fell by 24%
- Company voluntary arrangements (CVAs) fell by 46%
Given the strict lockdown restrictions imposed during the course of the pandemic, the statistics also confirm that the industries with the highest percentage of insolvencies for the 12 month period ending Q1 2021 (perhaps unsurprisingly) include: wholesale and retail trade, construction and accommodation and food services. A link to the full statistics published by the Insolvency Service can be found here.
Tim Carter, co-head of restructuring and insolvency at Stevens & Bolton, comments that:
The recent statistics will come as no surprise to many within the restructuring and insolvency sector. As discussed in our previous updates, the government’s swift introduction of a number of financial support and other measures, following the onset of the COVID-19 pandemic, has largely prevented the otherwise inevitable insolvencies of many companies. The measures introduced (initially temporarily) pursuant to the Corporate Insolvency and Governance Act 2020 (CIGA) - including restrictions on the use of statutory demands and winding up petitions (among others) – are undoubtedly a key factor in the low insolvency figures we are continuing to see. The recent extension of these temporary CIGA measures (see our earlier update here) will postpone the anticipated “wave” of insolvencies, which will inevitably hit following the eventual removal of the remaining government support. Opinions, within the sector, vary as to both the height and timing of this "wave"; there is also a growing concern that, by the time the true scale of the economic downturn unfolds in the case of the many non-viable "zombie" companies, there will be little or nothing left to restructure and/or recover for creditors.