There were 1,348 company insolvencies recorded in August 2021 in England and Wales, according to the latest figures from the Insolvency Service.
This is up 71% on the 788 figure reported in August 2020, although it is similar to the pre-pandemic figure of 1,366 registered in August 2019.
The stats also show that 1,256 creditors’ voluntary liquidations (CVLs) were handed out in August 2021 – the highest monthly level seen since January 2019.
The number of registered company insolvencies were also similar to pre-pandemic levels, driven by a higher number of CVLs – although other types of company insolvencies remained lower.
DROs and IVAs rise sharply
August 2021 also saw 1,714 debt relief orders (DROs) registered, which was 29% higher than August 2020 but remained lower than pre-pandemic levels (12% lower than in August 2019). Changes were made to the eligibility criteria on 29 June, including an increase in the level of debt at which people can apply for a DRO from £20,000 to £30,000.
There were, on average, 7,021 IVAs registered per month in the three-month period ending August 2021, which is 44% higher than the three-month period ending August 2020 and 4% higher than the three-month period ending August 2019.
Breathing Space scheme supports thousands
Between the launch of the Breathing Space scheme on 4 May 2021, and 31 August 2021, there were 22,151 registrations, comprised of 21,884 Standard breathing space registrations and 267 Mental Health breathing space registrations.
The Breathing Space initiative was introduced to legally protect debtors from their creditors. There are two types of breathing space: a standard breathing space and a mental health crisis breathing space.
A standard breathing space is available to anyone with problem debt. It gives them legal protections from creditor action for up to 60 days. The protections include pausing most enforcement action and contact from creditors and freezing most interest and charges on their debts.
A mental health crisis breathing space is only available to someone who is receiving mental health crisis treatment and it has some stronger protections. It lasts as long as the person’s mental health crisis treatment, plus 30 days (no matter how long the crisis treatment lasts).
Changes to rules on winding-up petitions
The rules around protecting businesses with unpaid debts of £10,000 or more have now also changed.
A ban on winding up petitions was introduced in June 2020 to ensure that companies in distress as a result of the pandemic were not forced into insolvency unnecessarily. The restrictions ended on 1 October.
However, the threshold for a winding up petition has been temporarily raised to £10,000 so creditors cannot insist on repayment of less than this amount.
And anyone chasing debts must first seek proposals for payment from the debtor business and allow 21 days for a response before they can proceed with winding up action.
The new measures are designed to give smaller companies – in particular retail and hospitality businesses which were hardest hit during the pandemic – more time to trade their way back to financial health before creditors can take action to wind them up.
Although, the ban on winding up petitions for commercial rent arrears accrued during the pandemic will remain in place.