An increase in business and personal insolvencies could signal that the South West economy is in for a difficult winter as Government Covid support is withdrawn and inflation mounts, says an insolvency expert.
Philip Winterborne, chair of insolvency and restructuring trade body R3 in the South West, said a large rise in corporate insolvencies is evidence that many businesses are struggling post-pandemic, especially as Government support, such as the furlough scheme, comes to an end.
Government figures for September 2021 reveal there were 1,446 registered company insolvencies across England and Wales, 56% higher than in the same month in 2020, when there were 928, but 4% lower than that in the same month in pre-pandemic 2019. Corporate insolvencies also increased by 7.2% in September compared to August’s figure of 1,349.
The Insolvency Service also stressed the overall increase in company insolvencies was thought to be due to a higher amount of creditors voluntary liquidations (CVLs). The total of 1,328 CVLs in September 2021 was 80% higher than that in September 2019 and 21% higher than in September 2020.
The South West branch of insolvency and restructuring trade body R3 also highlighted that personal insolvencies are also up by a third, with widespread supply chain disruption and significant wholesale energy price increases signalling the possibility of more misery to come.
Personal insolvencies rose by 9.2% to 9,954 in September 2021 compared to August’s figure of 9,118, and were 33.2% higher than September 2020’s figure of 7,471.
Mr Winterborne said: “The insolvency statistics published today show the economic effects of the pandemic are continuing to take a toll on businesses and consumers.
“The dramatic increase in corporate insolvencies compared to this time last year – to the highest level since January 2020 – illustrates just how crucial the Government’s support has been in keeping businesses afloat and suggests that there may be a rocky road ahead for the business community now it is being withdrawn.
“The monthly increase in corporate insolvencies was driven by a rise in CVLs, which increased for the third consecutive month. This suggests that directors in the South West are choosing to close their businesses after deeming their financial survival unlikely after 18 months of trading through a pandemic.
“Despite the fact that businesses have benefitted from two months of relatively restriction-free trading and an economic boost over the summer, conditions are still not back to where they were before the pandemic.
“Consumers are now increasingly cautious about the state of the economy, their personal finances and the increased cost of living and are more wary about spending their money.
“And with widespread supply chain disruption and significant wholesale energy price increases building up between September and October, there are likely to be significant hurdles for South West businesses and individuals still reeling and struggling to get back on their feet following the impact of Covid.”
Mr Winterborne , a Partner at Temple Bright Solicitors in Bristol, added: “When it comes to personal insolvencies, the increase between August and September was driven by a rise in Individual Voluntary Arrangements and Debt Relief Orders (DROs). This suggests that more people are in debt and taking steps to resolve the issues they face with their finances. The situation is still tough out there for people.
“Although September saw increases in job vacancies and the number of people in work returned to pre-pandemic levels, a high percentage of those employed are in temporary roles, and more than a million people were still on furlough when the programme closed at the end of the month.
Business Live’s South West Business Reporter is William Telford. William has more than a decade’s experience reporting on the business scene in Plymouth and the South West. He is based in Plymouth but covers the entire region.
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“Government support has been a lifeline for many, and initiatives like the Breathing Space scheme have proved welcome support for people in financial distress. However, this support has not been able to help everyone, and many people have had to use savings to cover expenditure during the pandemic.”
He added: “Anyone in the South West worried about their finances – whether business, personal or both – should seek advice at the earliest possible opportunity. When you’re worried about money, having that initial conversation about your concerns is hard, but doing so as early as possible will mean you have more potential solutions available and more time to reach an informed decision about which of them is right for you.”