Despite the what is now officially a recession, a wave of money and government support totalling over £83bn (furlough and loan schemes only) is still keeping UK companies afloat, but corporate debt levels are soaring as a result.
The result of the unprecedented support is that according to figures just released by the Insolvency Service, English corporate insolvency levels remain over a third lower than this time last year (955 July 2020, 1,451 July 2019), but corporate debt levels have increased dramatically. Bank of England figures show that lending to UK SME’s in June 2020 was nearly 16 times higher than it was in April 2020, and over 8 times higher than any other month in the last 7 years.
Whilst we still await the detailed breakdowns, the Insolvency Service figures show that there was a small uptick in Administration appointments, but Liquidation appointments remain very low compared to historic levels. This is also partly due to the prohibition of Statutory Demands and Winding Up petitions in May and June, and the resultant backlog still being dealt with by UK courts.
Gareth Harris, Restructuring Advisory Partner at RSM commented: ‘Given the wave of money provided to UK corporates the insolvency figures don’t really come as any surprise. However, despite this support and the furlough scheme, the recent employment figures suggest that UK corporates are starting to feel the pain and are taking some difficult decisions regarding future sustainable employment levels. A string of recent major job losses from many high street names, and the depth of the fall in GDP when compared to other European nations supports the view that there are major challenges ahead.’