Partner Article

Annual (2021) insolvency statistics – R3 response

Eleanor Temple, chair of insolvency and restructuring trade body R3 in Yorkshire and a barrister at Kings Chambers in Leeds, comments on the 2021 corporate and personal insolvency statistics for England and Wales:

Corporate insolvencies

• There were 14,048 underlying corporate insolvencies in 2021 – an increase of 11.2% from 2021’s figure of 12,634, but a fall of 18.2% on 2019’s figure (17,166) “The increase in annual corporate insolvencies has been driven by a rise in Creditor’s Voluntary Liquidations (CVLs), which reached levels not seen since 2009. The increase this year – and the surge in CVLs in the final quarter of 2021 – suggests that many directors are opting to close their businesses as they lack confidence in their trading prospects in the current climate. And while insolvencies still haven’t reached pre-pandemic levels, this is unlikely to remain the case for long.

“The increase also reflects the torrid 12 months businesses have faced as they attempt to carry on trading in the second year of a pandemic amidst uncertainty, change and challenge. Businesses have had to trade through lockdowns and restrictions, increases in energy prices, and supply chain issues. And they’ve done so in an economy which only returned to where it was before the pandemic in November – just weeks before the Government’s Omicron measures were introduced.

“Given the current climate, we urge company directors to be aware of the signs of financial distress and seek help if any present themselves. Our message is a simple one: if you’re having problems paying staff or suppliers, your stock levels are piling up, or you’re worried about paying your rent or your tax debts, or your business’ finances or future, seek advice as soon as possible.

“Talking about your concerns about your business is hard, but the sooner you do, the more options you have to turn it around, and the more time you have to take a decision about your next steps. Most R3 members will offer a free hour’s consultation to concerned directors so they can understand the issues their business faces, and outline the potential options for improving its situation.”

Personal insolvencies

• There were 110,022 personal insolvencies in 2021 – a fall of 1.4% on 2020’s figure of 111,578, and a fall of 9.9% compared to 2019 (122,155) “The annual fall in personal insolvencies is due to an overall decline in the number of bankruptcies and Debt Relief Orders. Individual Voluntary Arrangement numbers increased this year, which suggests that more people are seeking help with their debts and coming to an agreement with their creditors without having to go down the bankruptcy route.

“It’s also worth noting that although fewer people entered into a Debt Relief Order this year, more than 3,000 more people entered one in the second half of the year than the first. This increase can be attributed to the increase in the Debt Relief Order entry thresholds in June – and might explain the decline in bankruptcy numbers.

“However, the figures published today can’t disguise the fact that the last 12 months have taken a toll on people’s finances in England and Wales, not to mention the concern members of the public have about their financial futures and the future of the economy.

“While the Government’s support measures have helped a great many people over the last year, they haven’t been able to help everyone. Levels of personal debt have increased, and household debt is predicted to increase later this year as households attempt to balance their books amid rises in inflation and energy prices and falling wages.

“Anyone who is worried about their finances should seek advice now rather than letting their problems spiral. We know it can be incredibly hard to talk about money, but it’s better to have the conversation as soon as you can, so you have a broader range of options and time to make a considered decision about your next steps.”

This was posted in Bdaily's Members' News section by Emma Kilmurray .