The number of businesses filing for insolvency fell in the first three months of 2020, new figures have revealed.
While encouraging, multiple experts have warned of a “pincer movement” in the second quarter of the year, with a “surge in limited companies going bust being mirrored by a drop in new firms setting up”.
According to official figures, the total number of company insolvencies decreased in the three months to March 2020 compared to the previous quarter and the same quarter a year previous. These include 2,708 Creditors’ Voluntary Liquidations (CVLs), 701 Compulsory Liquidations, 404 Administrations, 69 Company Voluntary Arrangements (CVAs) and just one receivership.
But the Office for National Statistics (ONS) warned that the numbers may not truly represent the true course of insolvencies in the first quarter.
“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”, said the statisticians.
“Therefore, some caution needs to be applied when interpreting trends in numbers of insolvency recorded in the most recent quarter.”
Likewise, the Enterprise Research Centre (ERC) said the UK business community is heading into a “pincer movement”. Its data points to a “spike” in limited companies going out of business, coupled with a “big decline” in new start-ups. These trends were seen nationwide since the start of March, when lockdown measures were first put into place.
According to ERC data, some 61,472 limited companies became insolvent between the start of March and mid-April – an increase of 70 per cent compared to the year previous. Meanwhile, the number of new start-up registrations fell by 23 per cent compared to the same period.
Commenting on the figures, Mark Hart, Deputy Director of the ERC, said: “The Chancellor has unveiled a substantive package of support for UK firms, but we know that many are struggling to access this assistance. If those shortcomings aren’t remedied fast, we’d expect to continue seeing a long, slow decline among the private-sector firms that support millions of jobs across the economy.”
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