Monthly UK insolvency statistics - May 2020

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

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, and in most cases have not returned to prelockdown levels. 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

The number of company insolvencies remained low in May, driven by the reduction in compulsory liquidations. The average daily numbers of compulsory liquidations fell to just 20 per cent of the pre-lockdown March figures.

The numbers of individuals entering insolvency through debt relief orders or bankruptcies also remained low, when compared to pre-lockdown levels. However, the numbers of individual voluntary arrangements (IVAs) returned to pre-March levels in April and increased in May. Numbers of IVAs were elevated in May because of technical issues experienced by a provider resulting in delayed registration with the Insolvency Service.

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 – May 2020

Total company insolvencies decreased in May 2020 when compared to May 2019. In May 2020, there were a total of 944 company insolvencies in England and Wales, which included:

790 creditors’ voluntary liquidations (CVLs)
32 compulsory liquidations
110 administrations
12 company voluntary arrangements (CVAs)
no receiverships

Overall, there was a 30 per cent decrease in total company insolvencies when compared to the same month last year. This was driven by a decrease in the number of compulsory liquidations in May 2020, which fell by 88 per cent, when compared to May 2019.

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 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.

In May 2020 there was also a 17 per cent decrease in the numbers of CVLs when compared to May 2019, and a 61 per cent decrease in CVAs. While administrations rose by 16 per cent when compared to May 2019, it’s suggested this was driven by low numbers of administrations in May 2019.

Effects of coronavirus on company 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 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 29. 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

Throughout April and May the average daily numbers of registered company insolvencies has increased; however, it has remained lower than pre-lockdown levels. This was particularly the case for compulsory liquidations which fell 80 per cent from an average of ten new cases per day pre-lockdown in March, to an average of two cases per day in May.

Individual insolvency statistics for England and Wales – May 2020

As individual voluntary arrangement (IVA) numbers have been calculated using different methodology, they are presented separately to debt relief orders (DROs) and bankruptcies.

Overall DROs and bankruptcies decreased in May 2020 when compared to the same month last year, while on average IVAs increased when compared to May 2019. In May 2020, there were:

7,899 IVAs registered (using a three-month rolling average)
1,540 DROs
739 bankruptcies (690 debtor bankruptcies and 49 creditor bankruptcies)

Debt relief orders and bankruptcies

There was a 32 per cent reduction in DROs registered when compared to May 2019, while bankruptcies also fell by 49 per cent when compared to the same month as last year. The reduction in bankruptcies was driven by a 40 per cent fall in debtor bankruptcies and an 83 per cent reduction in creditor bankruptcies.

The fall in DROs and debtor bankruptcies corresponds with a reduction in applications for these services, which coincided with the announcement of enhanced government financial support for individuals and businesses since the emergence of the coronavirus pandemic. 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 during this time.

Individual voluntary arrangements

Due to volatile data, the Insolvency Service provided three-month rolling averages for IVAs, which indicate what the overall trend of IVA registrations might look like. Using the three-month rolling average, there was an 11 per cent increase in IVAs in May 2020 when compared to the average number of registered IVAs during each of the three months ending May 2019.

It is noted that the three-month rolling averages should be used to consider potential changes in IVA trends over time, and both sets of numbers should be used with caution.

Company insolvency statistics for Scotland – May 2020

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

company insolvencies in Scotland decreased when compared to May 2019
there were 35 company insolvencies
this was a decrease of 55 per cent when compared to May 2019

Of the 35 total insolvencies in Scotland in May 2020, there were 16 CVLs, 10 compulsory liquidations, six administrations and three company voluntary arrangements. There were no receiverships.

Due to administrative differences to England and Wales, most company liquidations in Scotland are compulsory liquidations. However, since April 2020 the numbers of CVLs were higher than compulsory liquidations, as the numbers of compulsory liquidations fell by 80 per cent in May 2020, when compared to the same month last year.

Company and individual insolvency statistics for Northern Ireland – May 2020

In Northern Ireland in May 2020 there were:

5 company insolvencies
88 individual insolvencies

Companies insolvencies were down from 87.5 per cent when compared to May 2019 and consisted of two CVLs, two CVAs and one administration. There were no compulsory liquidations or administrative receiverships.

Individual insolvencies were down 63 per cent from May 2019 and consisted of 40 DROs and 48 IVAs. There were no bankruptcies in May 2020.

Next insolvency statistics release

Individual and company insolvency statistics for June 2020 will be released on 14 July 2020 at 9.30am.

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Monthly Insolvency Statistics May 2020 (GOV.UK)

The Insolvency Service (GOV.UK)

Accountant in Bankruptcy (AiB)

Image: Getty Images

Publication date: 12 June 2020