CM June 2021 CM magazine

NEWS ROUNDUP
New statistics suggests
insolvencies may be on the rise
INSOLVENCIES may be on the
rise, according to the latest
insolvency statistics, despite
ongoing Government support
keeping many businesses afloat.
There were 2,384 seasonally
adjusted corporate insolvencies in
Q1 2021, a reduction of 21.9 percent
compared to Q4 2020’s figures of 3,053
and a fall of 38.3 percent compared to Q1
2020 (3,863).
Colin Haig, President of insolvency
and restructuring trade body R3 and
Head of Restructuring at Azets, says the
quarterly fall in corporate insolvencies
– to the lowest quarterly total on
record – has been driven by a drop in
all corporate insolvency processes:
“However, the increase in corporate
insolvencies between February and
March of this year, which was reported
earlier this month, suggests corporate
insolvencies may now be on the rise.
“It’s clear Government’s support
measures are still helping to keep
businesses going, but they have pushed
back rather than prevented the financial
pain of the pandemic from translating
into a sharp, sustained increase in
corporate insolvencies.”
The total number of corporate
insolvencies between April 2020 and
March 2021 fell by more than a third
compared with the same period a year
earlier, while GDP fell nearly eight
percent during the same period. A drop
in corporate insolvencies of this scale
during an economic climate like this
suggests that corporate insolvencies are
likely to rise – and rise sharply – in the
future. “The first three months of 2021
have been tough for businesses and
followed a year of pandemic-induced
problems – shutdowns, re-openings,
and the challenges of working in a way
that’s compliant with social distancing
guidelines.
“The first three months
of 2021 have been
tough for businesses
and followed a year
of pandemic-induced
problems – shutdowns,
and re-openings.’’
“Looking more widely, the economy
has not recovered from the onset last
April of the unprecedented economic
contraction, while consumer confidence
has also remained low. And although
consumer spending increased towards
the middle of March this year, it still
remained well below 2019 and 2020
levels for the majority of the first three
months of this year.”
As the COVID restrictions lift and
normality returns, Colin says businesses
face three key challenges: “First, they
need to keep a careful eye on their
cashflow levels to ensure they don’t fall
into the trap of over-trading. They also
need to make sure they have a plan for
reopening in a way that’s sustainable, so
they don’t undo their efforts to survive
the last year by mismanaging the next
couple of months. And they need to
think about how they will manage when
the Government support measures end.
“Many company directors have
delayed planning for this, but they
need to use the remaining time they
have to put a plan in place for the final
quarter of this year and beyond, before
the majority of the measures end in
June, and furlough is wound up in
September.”
There were 29,140 seasonally adjusted
individual insolvencies in Q1 2021, a fall
of 5.3 percent compared to Q4 2020’s
figure of 30,769, and a rise of 0.7 percent
compared to Q1 2020 (28,936).
Bankruptcies in particular are notably
lower this quarter than in Q4 of 2020,
and Individual Voluntary Arrangements
have also decreased, with the fall in
Debt Relief Orders less abrupt. The
quarter-on-year rise, meanwhile, is
driven entirely by a notable increase
in IVAs.
“It’s been a torrid twelve months
for many people and their personal
finances,” Colin concludes, “and while
IVAs tend to correlate to consumer
debts, the gap in bankruptcies and
DROs compared with this time last
year means there may be more
pain ahead if and when these figures
start to revert to more ‘normal’ historical
levels.”
Lockdown Release
RESULTS from Lowell, the European credit
management services business, confirms
that consumers have been repaying
their debts in significant volumes over
lockdown. In releasing its Q1 figures,
Lowell reported ‘significant’ UK collections:
a 102 percent collection performance
in Q1-21 vs its pre-COVID Dec-19 static
pool expectations. In a statement the
company said ‘such performance is very
encouraging, and management is pleased
with the pace of the recovery in the
deferred UK collections which is ahead of
expectations’.
CSA Awards
THE Credit Services Association is
launching a new Award scheme to
celebrate the outstanding work
and commitment of staff and
teams within its membership
organisations. Held as part of
the CSA’s UK Credit & Collections
Conference (UKCCC) in September,
the awards are divided into three
categories: a CSA Merit Award;
CSA Team Award; and the CSA
Innovation Award. Entries are invited
by 12 July. For details, see the CSA
website. www.csa-uk.com/awards
Gold Star
INVESTORS in People has again awarded
credit management group Intrum UK
gold accreditation, demonstrating the
firm’s commitment to high performance
through good people management. Eddie
Nott, Intrum’s UK Managing Director, says
the team has worked tirelessly through
unprecedented times: “This accreditation
is testament to the value we place on our
people and the experience they provide
for our customers.” Investors in People
is the international standard for people
management, defining what it takes to lead,
support and manage people effectively.
Advancing the credit profession / www.cicm.com /June 2021 / PAGE 6