Monthly insolvency statistics for England and Wales - April 2020

In response to the coronavirus (COVID-19) pandemic, the April 2020 individual and company insolvency statistics for England and Wales have been published by the Insolvency Service, together with related company insolvency figures for Scotland.

Insolvency statistics for England and Wales following coronavirus lockdown

The Insolvency Service has committed to releasing monthly company and individual insolvency statistics for England and Wales, and monthly company statistics for Scotland, throughout the remainder of the coronavirus (COVID-19) pandemic, and for a period thereafter.

According to the Insolvency Service, overall numbers of company and individual insolvencies dropped in the days immediately after the UK lockdown was applied on 23 March 2020. It is likely this was a result of a combination of factors including:

HM Courts & Tribunals Service reducing the operational running of the courts and tribunals
HMRC reducing their enforcement activity
The Insolvency Service, insolvency practitioners and Companies House having to adjust to new working arrangements
Delays in documents being provided to Companies House by insolvency practitioners

However, according to the Insolvency Service, numbers of companies and individuals entering insolvency in April 2020 broadly returned to pre-lockdown March levels for most insolvency types. The Insolvency Service does note that as they do not record whether an insolvency is directly related to the coronavirus pandemic, it is not possible to state its direct effect on insolvency volumes.

Company insolvency statistics for England and Wales – April 2020

Total company insolvencies decreased in April 2020 when compared to April 2019. In April 2020, there were a total of 1,196 company insolvencies in England and Wales, which included:

933 creditors’ voluntary liquidations (CVLs)
97 compulsory liquidations
144 administrations,
21 company voluntary arrangements (CVAs)
one receivership

Overall, there was a 17 per cent decrease in total company insolvencies when compared to the same month last year. While there was a 9 per cent decrease in the numbers of CVLs in April 2020 and a 3 per cent decrease across all other types of company insolvency, this was mainly driven by a decrease in the number of compulsory liquidations in April 2020, which fell by 60 per cent when compared to April 2019.

Effects of coronavirus on company insolvency statistics for England and Wales

The Insolvency Service suggest that as compulsory liquidations require a winding-up order to be obtained from the court, the UK lockdown and resulting reduced operational running of HM Courts & Tribunals Service may have played a factor in the 60 per cent fall. The government also announced in late April that it would prohibit the use of statutory demands and certain winding-up petitions from 27 April to 30 June 2020.

During the first three weeks of March, prior to the UK lockdown on the 23 March, an average of 66 company insolvencies were registered daily. In the remaining six working days following lockdown in March, the average daily number of company insolvencies registered halved to 30. This reduction is linked to:

Short-term capacity constraints at Companies House as it put in place safe processes to manage its work on-site
Delays in documents being provided to Companies House by insolvency practitioners

However, in April the average daily number of registered company insolvencies returned to pre-lockdown levels, except for compulsory liquidations which remained lower, at an average of five new compulsory liquidations each day.

Individual insolvency statistics for England and Wales – April 2020

Overall individual insolvencies increased in April 2020 when compared to the same month last year. There was a total of 10,379 individual insolvencies in England and Wales, including:

8,093 individual voluntary arrangements (IVAs)
1,496 debt relief orders (DROs)
808 bankruptcies (784 debtor bankruptcies and 24 creditor bankruptcies)

Overall there was an 8 per cent increase in individual insolvencies when compared to April 2019. However, there was considerable variation across the different individual insolvency types. For example, there was a 39 per cent increase in IVAs in April 2020 when compared to April 2019. The Insolvency Service does ask for caution when comparing IVAs registrations over a shorter time period, however, due to their ‘volatile time series’.

In April 2020, there was a 37 per cent reduction in DROs registered when compared with April 2019, while bankruptcies also fell by 46 per cent. The reduction in bankruptcies was driven by a 34 per cent fall in debtor bankruptcies and a 92 per cent reduction in creditor bankruptcies.

Effects of coronavirus on individual insolvency statistics for England and Wales

During the first three weeks of March, prior to the UK lockdown on the 23 March, an average of 446 individuals entered insolvency daily. In the remaining six working days following lockdown in March, the average daily number of individual insolvencies had fallen by 75 per cent to 112.

The overall average daily number of individual insolvencies appeared to return to pre-lockdown levels in April. However, this was driven by the high volume of IVAs registered in April. The Insolvency Service suggest many of these IVAs would otherwise have been registered in March and were instead deferred to April.

The average number of daily DROs and Bankruptcies remained low in April, when compared with the pre-lockdown period of March.

Company insolvency statistics for Scotland – April 2020

The Accountant in Bankruptcy, Scotland’s Insolvency Service, administers company insolvency in Scotland. They reported that in April 2020:

company insolvencies in Scotland decreased when compared to April 2019
there were 46 company insolvencies
this was a decrease of 55.5 per cent in comparison to April 2019

Of the 46 total insolvencies in Scotland in April 2020, there were 24 CVLs, 17 compulsory liquidations, four administrations and one company voluntary arrangement. There were no receiverships.

Due to administrative differences to England and Wales, most company liquidations in Scotland are compulsory liquidations. However, for the first time in this time series, the numbers of CVLs were higher than compulsory liquidations, with the number of compulsory liquidations falling by 74 per cent when compared to April 2019.

Next insolvency statistics release

Individual and company insolvency statistics for May 2020 will be released on 12 June 2020 at 9.30am.

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Monthly Insolvency Statistics April 2020 (GOV.UK)

The Insolvency Service (GOV.UK)

Accountant in Bankruptcy (AiB)

Image: Getty Images

Publication date: 15 May 2020