The economic damage caused by the coronavirus pandemic is “now starting to be reflected in levels of corporate insolvency”, a report has revealed.

The research, published by insolvency and restructuring trade body R3, comes as insolvencies increased by 40 per cent in the third quarter of 2021.

The Insolvency Service figures show that there were 3,765 corporate insolvencies in July, August and September – around 17 per cent higher compared to the previous three months, and 43 per cent higher compared to the third quarter of 2020.

The rise was primarily driven by an increase in Company Voluntary Liquidations (CVLs), which were at their highest level since the second quarter of 2009.

A CVL is an insolvency procedure whereby a company’s directors or owners decide to close their business as it is unable to pay its creditors and there is no prospect of a turnaround.

Nicky Fisher, Deputy Vice President at R3, said the figures reflect the economic impact of Covid-19.

“The economic damage caused by the pandemic is now starting to be reflected in levels of corporate insolvency,” she said.

“Corporate insolvencies have risen this quarter to the highest quarterly figure since the pandemic began, and this has been driven by a rise in Creditors’ Voluntary Liquidations – to the highest quarterly total in 12 years.”

She added: “The rise in CVLs would suggest that company directors are choosing to close their businesses after trading for more than a year and half during a pandemic and deeming future success unlikely.

“As we enter the winter months, directors need to be alert to signs their business might be distressed, which include cashflow issues, problems paying staff or suppliers and increasing stock levels – and seek advice as soon as any of them present themselves, or if they become worried about their business and its finances.”

For help and advice with related matters, please get in touch with our team today.