THE impact of the coronavirus crisis is only beginning to show up in insolvency figures as business faces a “tough road ahead”, experts have warned.

Corporate insolvencies in England and Wales rose 29 per cent between June and July this year – but were still 34 per cent lower than in July 2019.

Garry Lee, chair of the insolvency and restructuring body R3’s Southern and Thames Valley region, said the figures were still being suppressed by the government’s emergency aid to businesses.

“The month-on-month rise in corporate insolvencies in July is largely down to an increase in administrations, compulsory liquidations, and creditors’ voluntary liquidations (CVLs),” he said.

“Although overall numbers remain low in comparison to the same time last year, this uptick could suggest that the pandemic might now be starting to be seen in the insolvency figures.”

Personal insolvencies were 12 per cent down on June and 40 per cent lower than in July 2019.

“On the personal insolvency side, this month’s decrease has been driven by a reduction in the number of debt relief orders (DROs), and individual voluntary arrangements (IVAs),” said Mr Lee, who is associate director of the recovery and restructuring department at accountancy firm Smith and Williamson in Southampton.

“Bankruptcies have increased slightly, due to a small rise in the number of debtor applications, but they are still well below pre-pandemic levels.”

He added: “It’s important to note that although the statistics suggest the pandemic is starting to affect corporate insolvency levels, the government’s continued support for businesses and consumers means we’re not much nearer to understanding how Covid-19 is truly affecting underlying corporate or individual distress than we were last month.

“However, all the signs point to a tough road ahead. The UK has entered a recession, consumer confidence is low, and a number of big-name brands have recently announced they are exploring or have entered insolvency or restructuring procedures.

“This suggests the business climate will be challenging in the foreseeable future – and will not be made any easier as the government support packages begin to wind down.

“Our members are telling us that it may not be long before companies which would be viable under normal circumstances begin to seek support from an insolvency and restructuring professional, as a result of the impact of the pandemic.

“This may lead to an increase in requests for personal insolvency support if people lose their jobs or agree to take on liability for a business’s debts, by virtue of personal guarantees, as part of an unsuccessful attempt to turn it around.

“Another factor that may also affect personal insolvency numbers is the ending of the various payment holidays that are currently available – especially if people’s incomes haven’t returned to the level they were at before the pandemic began.”