The most recent Insolvency Service figures have revealed that company insolvencies are 35% lower than before the coronavirus crisis.
The report shows that 925 companies were declared insolvent in April compared with 1,429 in the same month in 2019 and 1,199 last year.
However, we are only at the start of recovering from various interruptions to business and from lockdowns.
Also, sooner or later the Government’s temporary restrictions on the use of statutory demands and on certain winding-up petitions will come to an end.
It is therefore likely that as businesses start to pay back their various Covid-related loans and other deferred payments, insolvencies will rise again.
Begbies Traynor’s most recent Red Flag alert for Q1 showed that 723,000 businesses were now in ‘significant financial distress1’, a 15% increase from Q4 2020 to Q2 2021.
Given all the above, we would urge businesses to continue to very carefully manage their cash flow and beware of over-trading in their desire to quickly get back to as near normal activity as possible.
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