Insolvency rate fell during lockdown but sharp rise expected

R3's latest survey points to a sharp rise in insolvencies from October.

COMPANY insolvencies decreased during lockdown, but are expected to rise sharply as early as October, insolvency and restructuring trade body R3 has said.

The Northern Ireland chair of R3, James Neill, said government support packages kept many firms afloat in the past few months.

However, R3’s latest survey among UK insolvency and restructuring professionals points to a significant change in the months heads.

R3 said an overwhelming majority (93.7 per cent) of respondents expect corporate insolvency numbers to rise over the next year, with nearly six-in-ten (56 per cent) predicting that the increase will occur between October and December 2020.

Mr Neill, a founding partner at advisory firm HNH, said: “Despite the lockdown and the continuing economic turmoil, corporate insolvencies actually decreased in previous months.

“R3 members reported that, during April and May, the enquiries they received were mainly around advice on companies’ eligibility for the state-provided relief packages, rather than for formal insolvency support.

“This is in no small part due to the Government’s support measures, which have helped a number of businesses which would otherwise have struggled due to the pandemic.

“It’s clear from the survey results, however, that it’s a question of when, not if, corporate insolvency numbers increase. The support available to businesses has deferred, rather than deterred, the rise in corporate insolvencies expected in our current economic climate.”

More than half (56.1 per cent) of those surveyed said that they expected corporate insolvency numbers would be significantly higher in 2020 than in 2019, while 37.6 per cent thought they would be somewhat higher.

Respondents felt the main triggers for corporate insolvency advice over the next 12 months would be rent payments or arrears (61.7 per cent), trade debts (49.7 per cent), tax payments or arrears (48.1 per cent), and wage payments (35.5 per cent).

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