By Ian McConnell
A spike in UK company failures could start in October, amid the fall-out from the coronavirus pandemic, experts have warned.
A survey of insolvency and restructuring professionals shows 93.7 per cent expect the number of company collapses to rise over the next year. And 56% predict a steep increase will be seen between October and December this year.
Publishing the results of its survey, insolvency and restructuring trade body R3 highlights the impact of huge government support measures in warding off insolvencies in the short term as the coronavirus pandemic triggered lockdown in the UK to slow the spread of Covid-19 and brought economic turmoil.
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However, it warned that “it’s a question of when, not if, corporate insolvency numbers increase”.
Of R3 members surveyed, 56.1% said they expected corporate insolvency numbers would be “significantly” higher in 2020 than in 2019. And 37.6% thought they would be “somewhat” higher.
They forecast the main triggers for insolvency would be rent payments or arrears, trade debts, tax payments or arrears, and wage payments.
R3 said: “Despite the lockdown and the continuing economic turmoil, corporate insolvencies actually decreased in previous months. R3 members reported that, during April and May, the inquiries they received were mainly around advice on companies’ eligibility for the state-provided relief packages, rather than for formal insolvency support."
It added: "This is in no small part due to the Government’s support measures, which have helped a number of businesses which would otherwise have struggled due to the pandemic.”
However, the trade body warned: “It’s clear from the survey results, however, that it’s a question of when, not if, corporate insolvency numbers increase. The support available to businesses has deferred, rather than deterred, the rise in corporate insolvencies expected in our current economic climate.”
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