The UK Government insolvency statistics for Q2 2021 were released on 29th October and show the long expected increase in company insolvencies. The figures for England and Wales showed a 17% increase in insolvencies compared to Q2 2021 and a 43% increase compared to Q3 2020.
This rise was anticipated as the various Government initiatives to support companies through the worst of the Covid pandemic were would down – VAT and Corporation tax deferrals, furlough, vat reductions, rate holidays and limitations on the use of court action. Also, the various Covid loan schemes, with a 12-month repayment holiday, are now starting to fall due for repayment.
All this, at a time when there are international supply problems, delays with raw materials and increasing costs means that the mounting pressure on companies has triggered a significant rise in corporate insolvencies.
The overall level of corporate insolvencies had been down by 27% in 2020, despite a 10% contraction in economic output and remained low during the first half of 2021.
Unfortunately, forecasts predict a further rise in corporate insolvencies through 2022, both in the UK and across the world.
Atradius and Euler Hermes, the two largest global credit insurance companies, have each recently published their forecasts which suggest that UK Business failures in 2022 will increase by 32% – 33%.
Begbies Traynor, the restructuring experts, state that there is an increase of 17% in the number of companies which are “critically distressed” – this is an indicator of future insolvencies.
Euler Hermes analysis states that UK Government intervention during the worst of the pandemic reduced the number of business failures by just under 19,000, it looks like many of those companies may not make it through 2022.
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