The Insolvency Service publish the seventh release in its monthly series to provide more up to date information on the number of companies and individuals who are unable to pay debts and enter formal insolvency procedures due to the COVID-19 pandemic.
Overall, the numbers of company and individual insolvencies remained low in October 2020, compared to that in 2019. This is likely to be driven by the Government measures put in place in response to the coronavirus pandemic, including HMRC reducing its enforcement activity, reduced operational running of the courts, temporary restrictions placed on the use of statutory demands and certain winding up petitions and enhanced government financial support for companies and individuals.
Note that the Insolvency Service does not record if the insolvency is directly related to the coronavirus pandemic – it is just assumed and thought some type of link exists. A certain causal effect cannot be stated.
Company Insolvencies (UK):
In October there was a total of 856 company insolvencies across England and Wales, further broken down as follows:
- 672 creditors voluntary liquidations (CVLs)
- 104 administrations
- 59 compulsory liquidations
- 21 company voluntary arrangements (CVAs)
- 0 receivership
This was a 42% decrease overall in company insolvencies, compared to the same month last year. This is thought to be driven by the decrease in CVLs and compulsory liquidations, which fell by 36% and 76% respectively. Interestingly, CVA usage fell by 42% compared to the same month last year.
It is thought that the reduction in the number of company insolvencies was driven by the range of Government support put in place to financially support companies in response to the pandemic. The government also announced they would prohibit the use of statutory demands and certain winding-up petitions from 27 April to 30 June 2020 – further extended until 31 December, by the Corporate Insolvency and Governance Act.
To add, between 26 June and 31 October 2020, two companies were granted a moratorium and one had a restructuring plan sanctioned by the court. Low usage of these legislative tools is thought to be due to the Government support which remains in place for companies. Some of these measures have now been extended for a further period too.
Company Insolvencies (Scotland)
October 2020 saw 44 company insolvencies in Scotland, comprising of 11 compulsory liquidations, 27 CVLS, 5 administrations, 1 receivership and no CVAs. Overall, this is a reduction of 47% company insolvencies, compared to that in October 2019.
Company Insolvencies (Northern Ireland)
In October 2020, there were 8 company insolvencies in Northern Ireland; made up of 5 CVLs, 1 compulsory liquidation and 2 CVAs. No administrations or receiverships were noted. The total figure here was down by 84% from October 2019.
Touching on individual insolvencies….
For UK figures, they remained low in October. There were 1,527 Debt Relief Orders (DROs) and 1,048 bankruptcies. This was a reduction by 37% and 25% respectively, compared to the same month last year. Compared to statistics from September 2020, statistics were stable, with the amount of DROs remaining the same.
The decrease in bankruptcies is thought to be driven by a fall in debtor applications and creditor petitions. The enhanced Government financial support for individuals and businesses since COVID-19 emerged, coupled with reduced HMRC enforcement activity and reduced running of the courts has contributed to these falls.
It was also found that there were 6,154 individual voluntary arrangements (IVAs) registered, on average, during the three months ending October 2020. This was 9% lower than the three-month average observed in the period ending October 2019.
When looking at the figures for Northern Ireland, October 2020 saw 114 individual insolvencies, down 51% from October 2019. This consisted of 18 debt relief orders, 77 IVAs and 19 bankruptcies.
Find the full publication of statistics here.