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Creditor Voluntary Liquidation Rates Rising But Still Being Held Back for Now

By Jon Munnery
16 December 2020

Rates of entry into Creditor Voluntary Liquidation (CVL) increased during November but continue to be held back by the various forms of protection being afforded to businesses by the government.

Corporate insolvency rates as a whole increased during November, compared to October, with a rise in the number of CVLs cited as the main contributor to that increase.

Company Voluntary Arrangements (CVAs), administrations and compulsory liquidations all fell in number during November, according to the latest official figures published by the Insolvency Service.

Both corporate and individual insolvency rates are well down on where they were 12 months ago, which the Insolvency Service attributes at least in part to “government measures put in place in response to the coronavirus pandemic”.

The insolvency industry’s main trade body R3 agrees with that assessment and credits the government’s emergency coronavirus measures with keeping insolvency and liquidation rates much lower that they would otherwise be.

A total of 889 corporate insolvencies were recorded across England and Wales in November 2020, which is up 4 per cent compared to October but down 41 per cent compared to November 2019.

R3 president Colin Haig said in a statement: “The statistics published today are not an accurate reflection of the state of the economy or the state of the UK business community.  

“Businesses and individuals from Land’s End to John O’Groats have been affected by COVID-19.

“The only reason this hasn’t shown up in the insolvency statistics yet is because of the extensive support the government has provided. Without it, we’d be in a very different situation - and a very grave one at that.” 

In addition to the furlough scheme, which has helped keep many thousands of UK businesses out of serious financial trouble in recent months, Mr Haig cites the temporary ban on winding up petitions until March 2021 as a key reason why corporate insolvencies and liquidations are currently as low as they are.

“A good festive trading period has never been more important, but the impact of repeated stop-start closures in many sectors, and the disruption to usual pre-Christmas activities and events, mean that many companies will face a cold start to 2021,” sad Mr Haig from R3.

“As we approach the end of this year, it becomes even more critical that company directors and individuals seek advice from a qualified source as soon as they see signs their business or their personal finances are starting to struggle,” he added.

Jonathan Munnery
Partner
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