The number of companies to fall into administration or receivership in the first half of 2021 was at 301, down by more than half when compared to the 655 reported in the first half of 2020.
According to the analysis of notices in The Gazette by turnaround and restructuring business Interpath Advisory, this has been as a result of the government’s Covid-19 support measures, as well as a supportive lending community that continued to help companies through the pandemic.
The researchers also found that May and June saw particularly low levels of administrations of receiverships – as only 32 companies filed for insolvency in these months. This is the lowest monthly total since Interpath started tracking this data in 2005.
It comes after the Treasury reported that UK businesses had received nearly £80bn of emergency government-backed loans during the Covid-19 crisis.
Interpath Advisory’s chief executive Blair Nimmo said: “The dichotomy of having historically low insolvency rates at a time of significant economic crisis is naturally prompting concern in some quarters that the taxpayer is propping up an army of zombie companies.
“But while it is fair to say insolvencies are being suppressed artificially thanks to the raft of support available, we also know there are lots of good businesses out there whose balance sheets are broken solely due to the impact of the pandemic – so it is only right they continue to be given the time and support to be able to build their way back out of the crisis.”
In his comment on the analysis, Nimmo said that, while Covid support measures are beginning to wind down, he personally doesn’t believe insolvency rates will escalate rapidly. He also thinks that all stakeholders – including banks and HMRC – will continue to be “pragmatic in their approach to companies experiencing difficulties as a consequence of the pandemic”.
Additionally, Nimmo explained: “As we exit lockdown, organisations – particularly those in those hardest hit sectors such as leisure, hospitality, travel and retail – are firmly in recovery mode. They will be asking themselves a number of questions.
“What does this ‘new normal’ mean for our business model? What does it mean for our balance sheet? And as we start to scale our business back up again, what does this mean for our funding? Maintaining a tight grip on cash and working capital will never have been more important.
“The more forward thinking organisations will also start to undertake options reviews as they crystallise their thinking on what the new trading environment means for them.”