A INCREASING number of bosses have decided to shut down their businesses after spending more than a year trying to survive the pandemic, according to an insolvency expert.
Business bankruptcies edged down in July from the previous month, but the year-over-year figures rose significantly for the third month in a row.
Southampton-based Mike Pavitt, outgoing chairman of local insolvency and restructuring body R3, said: âThe monthly decline in formal corporate insolvencies was not unexpected. Formal insolvency figures in recent years have often declined somewhat during holiday periods and away from recurring triggers such as quarter rent and tax claims. ”
He said the year-over-year increase for three consecutive months was potentially “much larger.”
Business bankruptcies fell 9.3% to 1,094 between June and July, but rose 13.4% from July 2020.
âWithin the overall increase, we have seen, revealingly, a comparatively huge 70.4% increase in voluntary creditors’ liquidations (VDAs) this month compared to July 2020, confirming that the numbers May and June were not a blip and that LCVs are up to pre-pandemic levels, âPavitt said.
âVoluntary liquidations tend to be triggered by company management rather than creditors, suggesting that a growing number of directors have decided to shut down their businesses after spending more than a year trying to survive the pandemic.
âWhile government support has continued to provide a lifeline for many businesses that would otherwise have potentially failed in an economic climate like this, this July has again been a very difficult month and business owners have known for some time that this support will soon be withdrawn. .
“The delay in lifting the remaining trade restrictions will have affected attendance and spending forecasts, meaning that many businesses in the South and the Thames Valley will now have spent more than 15 months in conditions. very different from normal and incurred reopening costs. of which they have not yet seen much profit.
Mr Pavitt, head of corporate restructuring and insolvency at Hampshire solicitors Paris Smith, added: âWith the economy opening up, consumer confidence would be at pre-pandemic levels and levels of spending higher than they were in 2019, the future does. sound more optimistic. That said, it will take longer for the most affected sectors to recover from the pandemic and some will not be as confident that they can recover at all once government support wears off.
âSMEs are the backbone of the UK economy, but many in the south and the Thames Valley have been hit hard by the pandemic, some irreparably. Even with the resumption of economic growth, trading patterns have changed and it will not be possible for all businesses to return to exactly what they were before the pandemic. ”