Insolvency statistics released for July 2020
Latest company and individual insolvency statistics remain low overall, but administrations increase by 25% in July 2020 following the failure of two corporate groups.
The latest monthly release of insolvency statistics for England and Wales was published on 14 August 2020. *
Overall numbers of company and individual insolvencies remained low in July 2020, when compared with the same month in the previous year. Despite this, the number of companies entering administration in July 2020 increased by 25% – largely due to two group company failures with multiple related companies entering administration.
Summary for July 2020 England and Wales
There was a 25% increase in the number of companies entering administration in July 2020 when compared to July 2019. This increase was primarily driven by two groups of companies with multiple related companies entering administration. These two failures account for approximately one in six of all companies entering administration in July 2020.
Compulsory liquidations remained low when compared with July 2019, but increased to the highest monthly level since the implementation of lockdown on the evening of 23 March. This was primarily a result of the courts resuming processing of a backlog of petitions following reduced operations in response to the coronavirus pandemic.
The numbers of bankruptcies and DROs remained lower than numbers seen in July 2019.
The average number of IVAs registered in each of the 3 months ending July 2020 was unchanged from the same 3-month period in 2019. However, underlying IVA data are volatile and therefore comparisons over time are not reliable.
Impact of COVID-19 business support measures
The overall low numbers are likely to be at least partly driven by Government measures set up in response to the coronavirus (COVID 19) pandemic, including:
- Reduced court and tribunal operations and reduced HMRC enforcement activity since the UK lockdown was applied
- Temporary restrictions on the use of statutory demands and certain winding-up petitions (leading to company compulsory liquidations) from 27 April and extended to 30 September 2020 under the Corporate Insolvency and Governance Act
- Enhanced Government financial support for companies and individuals.
As the Insolvency Service does not record whether an insolvency is directly related to the coronavirus pandemic, it is not possible to state its direct effect on insolvency volumes.
The statistics in detail – July 2020*
In July 2020 there was a total of 955 company insolvencies in England and Wales, comprised of:
• 590 creditors’ voluntary liquidations (CVLs)
• 166 compulsory liquidations
• 182 administrations
• 17 company voluntary arrangements (CVAs).
There were no receivership appointments.
The overall number of company insolvencies decreased by 34% in July 2020, when compared to the same month last year. This was primarily driven by a decrease in the numbers of CVLs and compulsory liquidations which fell by 41% and 36% respectively. There was a 56% decrease in the numbers of CVAs.
The reduction in company insolvencies is likely to be in part driven by the range of Government support put in place to support companies in response to the coronavirus (COVID 19) pandemic.
An increase in administrations due to two large entities
The number of companies entering administration in July 2020 increased by 25% in comparison to July 2019.
Note that there were two groups of companies that entered administration in July 2020 that included multiple related companies which were all recorded as separate companies entering administration. Underlying data suggests that these two failures accounted for approximately one in six of all companies entering administration in July 2020.
Debt relief orders and bankruptcies
There were 1,621 DROs in England and Wales representing a 31% reduction in July 2020, compared with the same month last year.
913 bankruptcies, made up of 849 debtor bankruptcies and 64 creditor bankruptcies, represent a 38% reduction compared with the same month last year. The reduction in bankruptcies was driven by a 27% fall in debtor bankruptcies and a 79% reduction in creditor bankruptcies.
How the numbers may be affected
The fall in DROs and debtor bankruptcies corresponds with a reduction in applications which coincided with the announcement of enhanced Government financial support for individuals and businesses.
The fall in creditor bankruptcies will likely have been a result of reduced HMRC enforcement activity during this period and in part, a result of reduced operational running of the courts.
Individual voluntary arrangements
There were 7,322 IVAs registered, on average, each month during the three months ending July 2020. This was the same rolling average as in the three months ending July 2019.
How the numbers may be affected
IVAs are counted once they are registered with the Insolvency Service and are reported by month of registration date. There can be a time lag between the date on which the IVA is accepted (the date of creditor agreement) and the date of registration by licensed insolvency practitioners. This can lead to volatility in the data from one month to the next and create difficulty in constituting reliable short-term trends.
In addition, recent statistics have been affected by technical issues experienced by an IVA provider, with approximately 4,950 IVAs registered in May 2020 that would otherwise have been registered between December 2019 and March 2020. Three-month rolling averages have been calculated to smooth the data and indicate what the overall trend of IVA registrations might look like if the underlying data were less volatile.
We publish a summary of the reports here each month. For advice relating to support, insolvency or recovery options, please contact us.
* This content and data was reported in full in the Insolvency Service Statistics for July 2020, published 14 August 2020 – see the full report here: https://www.gov.uk/government/statistics/monthly-insolvency-statistics-july-2020
Image source: The Insolvency Service Monthly insolvency statistics, July 2020