UK insolvency rate at a three year low!

1 min read MSPs
Credit Safe has published May's insolvency figures for the UK which shows the lowest levels for the last three years! However, once the economy restarts this is expected to change as those companies that are solely propped up by government funding will likely not survive a slow recovery.

Key finding from the latest report include:

  • A total of 1,155 companies became insolvent – the lowest monthly figure in three years.
  • The total number of insolvencies fell by 19% compared to April 2020.
  • The total number of insolvencies fell by 37% against May last year.
  • 16% of insolvencies came from within the Construction sector.

The report pointed to high levels of government intervention as the reason behind the trend. Even though we have seen some high profile brands go under recently, Frankie and Benny's the latest, it's possible these businesses were already teetering on the edge of insolvency.

The report stated:

"This significant reduction in the overall number of insolvencies undoubtedly reflects the particular circumstances resulting from the Covid-19 pandemic, and resulting lockdown. Many distressed businesses are managing to keep afloat by making use of the high level of government support available, and many may well have opted to file for an extension with Companies House. However, we have also seen that the number of court cases has been drastically reduced, with non-essential court hearings being postponed until later this year.

The total number of UK company insolvencies for the year rose to 8,919 by the end of May 2020. This represents a 4.63% decrease when compared to the same period (January – May) in 2019. Given that the trend for the period of January to March saw an increase of 13% we can expect the numbers to rise again once the economy restarts. Businesses may well not recover from the current slowdown and the administrative backlog in the courts and public administration will work through with a resulting rise in insolvencies."