THE number of firms going bust has fallen despite the coronavirus lockdown as government funding provided a lifeline for lots of companies.
However, experts warned the failure rate will increase in coming months as many ‘zombie’ firms are forced out of business.
The BBC Shared Data Unit found 5,699 insolvencies were recorded in the UK in the 14 weeks after the lockdown was introduced in late March, down 20 per cent from 7,124 in the same period last year.
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In Scotland, it found the number of insolvencies fell by around 10%, to 332, from 370.
The fall in insolvencies may reflect the importance of the wide range of official support provided to help firms cope with the impact of the coronavirus, such as the furlough programme and Bounce Back Loans scheme.
Changes in insolvency law have made it harder for creditors to wind firms up.
However, the number of insolvencies could increase rapidly as support programmes are unwound.
In a report on insolvencies published today the Shared Data Unit notes: “Experts have pointed to the billions in emergency support for businesses and changes to insolvency law but warned the true impact is unlikely to appear for months as businesses try to adjust to social distancing and other challenges.”
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Julie Palmer at business recovery specialist Begbies Traynor noted that with government initiatives to support businesses now winding down problems will mount during the autumn, warning: “This crisis will force many zombie companies out of business."
The Shared Data Unit’s findings were based on an analysis of entries in the London Gazette, which provides an official record of notices of corporate insolvencies. The study covered from the last week of March to the end of June.
The unit found the number of insolvencies halved in Glasgow, to 67 from 136. The number in Edinburgh fell to 45 from 65 and in Dundee to 8 from 60.
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However, insolvency numbers increased dramatically in the Aberdeen area amid the problems posed for the North Sea oil and gas industry by the sharp fall in commodity prices since March.
A spokesperson for HM Treasury said: “As the economy re-opens, we will continue to look at how to adjust our support in a way that ensures people can get back to work, protecting both the UK economy and the livelihoods of people across the country.”
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