Company insolvencies fall - but tsunami of failures likely by summer
CORPORATE insolvencies fell in Northern Ireland in the first three months of this year, despite the economic impact of coronavirus, new figures show.
But the numbers reveal little about the impact the lockdown measures have had on the economy.
And probably won't be until the end of the second quarter before the true cost of the crisis emerges, with an expected tsunami of company failures.
According to the Insolvency Service, there were 83 company collapses in the north between January and March.
Some 51 were compulsory liquidations, 20 by way of creditors’ voluntary liquidations (CVLs), seven by company voluntary arrangements (CVAs) and four administrations. There was also one receivership.
This represented a decrease of 26 per cent compared with the same quarter of the previous year.
There were also 621 personal insolvencies over the quarter, made up of 383 individual voluntary arrangements (IVAs), 129 bankruptcies and 109 via debt relief orders (DROs)
But the ONS warned that some statistics may have been affected where individuals, insolvency practitioners, intermediaries (who process debt relief orders) and courts were unable to process insolvencies in the usual manner during the latter part of March.
And Gareth Latimer, director (recovery and reorganisation) at Grant Thornton in Belfast, said caution needs to be applied when interpreting trends in insolvency numbers in the quarter just ended.
He said: “The latest data predominately relates to the period before the Covid-19 lockdown, so it doesn't yet present a full picture of the subsequent economic impact.
“As a result, it will be important to review the statistics for 2020 as a whole before making a judgment on the impact of the coronavirus, with economists predicting a sharp recession this year.
“In the medium term, the closure of courts as part of the lockdown will likely mean a significant fall in the number of insolvencies before a spike later in the year when some form of normality returns, possibly following the summer recess.”
Duncan Swift, past president of insolvency and restructuring trade body R3, said: “The impact of the coronavirus on every aspect of the business world is hard to overstate, and almost all companies, from multinationals to micro-businesses, have been affected.
“Government support on an unprecedented scale has been offered to companies and employees, but it's clear it won't be been enough to keep every company afloat, especially those which had entered the crisis period with existing debt problems.”
Media reports have estimated that been 800,000 and one million businesses, a fifth of the UK total, could collapse as a result of the pandemic, but this has been dismissed as “alarmist”.