New figures suggest fewer Leicestershire businesses went bust during lockdown than the same months in 2019 – but there are fears the picture could change when Government support ends.
In the three months from March 24 to June 30, 89 companies in Leicester and Leicestershire filed for insolvency according to the BBC Shared Data Unit.
That was less than half the 183 that went under in the same period in 2019.
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Across the 海角视频, around 5,000 companies have filed for insolvency since March, down compared with 6,500 last year.
The drop follows a spike in March around the start of lockdown.
But R3, the trade association of restructuring, advisory, and turnaround professionals, is warning corporate insolvencies could start going up by October.
Some parts of Leicestershire saw a big drop in insolvencies in the spring – from 77 in 2019 to just five in Harborough – while the number in North West Leicestershire was just five (compared to one in spring 2019).
At the same time 3,337 new businesses were registered in Leicestershire between April and June.
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The Shared Data Unit analysed data from the London Gazette, the official journal of record that carries notices of corporate insolvencies.
Information and communication companies have been hardest hit, with insolvencies up a third during lockdown compared to a year before.
Businesses most affected by lockdown closures and social distancing actually saw big drops in insolvencies – down 83 per cent for accommodation and food services, and 65 per cent for art, entertainment and recreation – possibly due to the economic support they have had such as loans, business rate relief, tax deferrals, top-up grants, and the furlough scheme.
A change in the law also means if a company cannot pay its debts due to coronavirus, its creditors cannot apply for it to be wound up until the end of September.
This, and courts handling fewer insolvency cases, would also contribute to the drop.
Stuart Adam, an economist at the Institute for Fiscal Studies said that without intervention, the situation might be worse and businesses coming out of lockdown faced big challenges.
Social distancing measures, reduced spending, business debts and general market uncertainty could all have an impact.
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He said: “Since many firms will undoubtedly shrink or go out of business and jobs will be lost – especially as the furlough scheme comes to an end – it will be vital over the coming months and years for others to start up or expand, to fill the gap and employ those left out of work.”
An R3 members survey for the Midland suggests nine-in-10 expect insolvency numbers to rise over the next year, with more than half predicting the increase will occur between October and December.
Respondents to its latest survey felt the main triggers for corporate insolvency advice over the next 12 months would be issues with rent payments or arrears, trade debts, tax payments or arrears and wage payments.
R3 Midlands chairman Eddie Williams, a partner at Grant Thornton, in Leicester, 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 enquiries they received were mainly around advice on companies’ eligibility for the state-provided relief packages, rather than for formal insolvency support.
“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.
“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.
“We would urge anyone who is concerned about the future of their business to seek advice as early as possible.
“Doing so will give them more options about their next step and allow them to make a more considered decision about how they move forward.”
The Government said its new Plan for Jobs would increase help through Jobcentres to people looking for work.
There was also the Kickstart Scheme, a £2 billion fund to create hundreds of thousands of new, fully subsidised jobs for young people.
An HM Treasury spokesperson 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 海角视频 economy and the livelihoods of people across the country.”