Samantha Keen, UK Turnaround and Restructuring Strategy Partner at EY-Parthenon, comments on the Q3 2021 company insolvency statistics, published today by the Insolvency Service. The figures show that company insolvencies have increased 17% from quarter two and 43% higher than in Q2 2020.
“After exceptionally low levels of business failures over the last 18 months, the Q3 data indicates that UK insolvency is returning to pre-pandemic levels, even before the removal of government support.
“The significant year-on-year increases in August and September are particularly concerning given that they came ahead of the end of the moratorium on winding-up petitions at the end of September.
“The rise in insolvency coincides with an increase in the number of profit warnings recorded by EY, with above average profit warning levels in September driven by supply chain and cost issues. Our data highlights the increasing difficulties companies face just as most government support is ending and as we’re seeing the escalating knock-on effects of supply chain, energy price and labour market issues.
“Government support has insulated many companies from the true impact of the significant level of change linked to the pandemic, the UK’s departure from the EU, and other market forces – such as digitisation and the transition to Net Zero.
“As we enter the all-important ‘golden quarter’, it’s critical that companies in retail and hospitality sectors have a strong Christmas, particularly given that the commercial rent moratorium ends in March 2022.
“Looking ahead, we expect to see a continuing rise in insolvencies in the coming months, driven by companies that would have failed without pandemic life-support and those who cannot survive without it. We also expect a simultaneous level of stress to build as companies struggle to adapt to rapid changes in their markets.”