- by P on 24/11/2020
So far in 2020 the full effects of the economic downturn as a result of the Covid-19 crisis in terms of company insolvencies has yet to fully show.
Overall 2020 has seen a decrease in insolvency figures this year compared to 2019. The first three quarters of 2019 saw 481 companies go under compared with 2020's figure of 419, a 13% decrease. This initial downward trend, coupled with Government financial support over the last nine months has kept insolvency figures much lower than one would expect. There has also been some factors to contend with in 2020, for example with the closure of courts and the inability of liquidators to hold meetings of creditors in the early days of lockdown, executing an insolvency was a much slower process in H1 this year.
However, Q3 insolvency statistics released by CRIFVision-net last week possibly show a sign of what's most likely to come.
Insolvency figures for the period from July to September were 17% higher than the same time the previous year (179 vs 153). This gradual increase in Q3 will most likely continue to grow over the next six to twelve months as we enter 2021.
Now that the courts have re-opened, meeting of creditors continue to be held virtually and as financial Government support begins to slow down an inevitable increase in insolvencies is most likely to occur. Looking back at the first year of the financial crash - 2008 saw 606 insolvencies, increasing to 1,376 the following year and reached a high point in 2012 with 1,932 insolvencies. Although the economic impact of Covid-19 is not projected to be as harsh as that in 2008, unfortunately in the months ahead it appears that many more companies will close their doors.
Q3 2020 Most Insolvent Industries
The Wholesale, Retail and Trade industry was most hit in Q3 with 38 insolvent companies, followed by Hospitality with 34. Highly associated with social interaction, these industries have and will suffer substantially greater challenges and will continue to be most impacted by the crisis, evident in the insolvency figures. Legal, Accounting & Business (23), Construction (17) and Community, Social & Personal Activities (14) round out the top 5 industries that saw the most insolvencies during July to September.
In order for our users to make the most informed decisions possible, CRIFVision-net have created the COVID Industry Impact Scale. This new score is now available on every credit report and is based on the industry which the company operates in, marking it on a scale of - 'No Impact', 'Low', 'Significant' or 'Severe'. Allowing you to identify the companies which may be impacted most during the crisis.
Commenting on the latest figures, Christine Cullen, Managing Director of CRIFVision net said:
"To date, the Government have been very proactive in creating and implementing supports for the SME sector in particular. Since then, these supports have been further enhanced through the additional funding and measures outlined in Budget 2021. However, the future threat of Covid-19 and what these additional Level 5 restrictions could mean for businesses across all levels still remains a real concern."
"In order to ensure that we create the most sustainable environment for businesses to survive and thrive, the focus needs to be on collaboration between Government and industry. The ever-changing landscape of Covid-19 will continue to be unpredictable and the key to mitigating damage in the coming months will rely on an agile and adaptable approach by businesses and Government."
For more information on the COVID Industry Impact Scale contact 01 903 2657 or Email: info.vision-net@crif.com
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