Company insolvencies up in Midlands - but some cause for optimism

As the number of insolvencies in England and Wales shot up by a fifth and remains at a level not seen since the 2008-09 recession, the economic path ahead may not be so thorny, the Midlands branch of insolvency and restructuring body R3 said.

The latest monthly statistics published by the Insolvency Service showed corporate insolvencies increased by 18.4 per cent in April to a total of 2,177 compared to March’s figure of 1,838, and by 52.7 per cent in comparison with the pre-coronavirus figure of 1,426 in April 2019.

The rate of company insolvencies during the 12 months ending April 30 was 57 per 10,000, rising from 52.6 per 10,000 a year earlier.

R3 Midlands Chair Stephen Rome said: “The annual and monthly increases in corporate insolvencies have been driven by a rise in all types of corporate insolvency process, but one of the key areas which stands out is the sizeable rise in Creditors’ Voluntary Liquidations.

“One factor behind this is likely to be directors closing their businesses at the end of the financial year, either because they believe the market won’t improve or because they’ve simply had enough after four tough years.

“Another possibility could be the difficulties small businesses in distress experience in being unable to access more complex and more expensive forms of restructuring and having to resort to liquidation as a means of dealing with unserviceable debt.

"Also of note is the increase in administrations. While this isn’t by a large number, it does suggest that there is a growing volume of businesses which could potentially be rescued rather than wound-up, and as the economy recovers we would anticipate this rise will continue.

“Further data available to us shows that the construction, retail and hospitality sectors have experienced the highest insolvency levels so far this year. Retail and hospitality businesses have been particularly affected by consumers’ wariness about spending money, poor weather in February and a tough pre-Christmas trading period. Issues with the weather will also have affected the construction industry, as will the fall in new work since the start of the year.

“But despite the difficult business climate over the period these figures cover, there is some cause for optimism. The economy is growing again and business and consumer confidence levels are both improving. While businesses remain concerned about costs and consumer demand, the mood is generally more positive with a significant increase in new company registrations being reported by Companies House.”