Corporate insolvencies are expected to increase by 27% in the coming months of 2020 as the pandemic the economy into recession.
The UK has the highest GDP contraction in Northern Europe following the pandemic and the Brexit uncertainty.
Businesses will face difficult times due to accruing liabilities and the withdrawal of some government support schemes and numbers of insolvencies are expected to increase in excess of those in 2008.
The insolvencies are expected to run into 2021 and a new report shows that UK insolvencies will be higher than the global average.
In the first half of 2020, insolvency levels did not reflect the economic decline caused by the pandemic. In fact, research showed that insolvencies fell. This was as a result of the government support offered which included temporary suspensions of insolvency applications and financial support for those struggling businesses.
Although an increase in insolvencies have been predicted, Bank of England data for July 2020 gave hopes for a V-shaped recovery, with increased borrowing. Also, the manufacturing sector has expanded at the fasted rate for more than six years in recent months.
Nevertheless, the pandemic has created new problems and it is predicted that, as government financial support eases, the UK GDP will suffer the biggest blow since the First World War.
Companies face a number of challenges, with distress levels expected to rise. Companies have been advised to take a slow and steady approach to restarting operations and allow for flexibility to enable them to react to continued uncertainty.
If you are concerned about your businesses ability to deal with these challenges, please speak to a member of our insolvency team to discuss your options and to receive commercial advice on issues and strategies.
As ministers gradually withdraw lifelines, small businesses are struggling to protect sales and jobs