Administration List’s latest data for September reveals that the number of insolvencies fell 5.9 per cent, from 202 insolvencies in August to 190 last month. This represents a continued decrease, after a 22.3 per cent fall in August.

Breaking down the numbers, administrations actually increased, while the number of liquidations dipped to enough of an extent to pull the total number of insolvencies down. According to our data, there were 27 administrations, an increase of 12.5 per cent since August, while 163 liquidations occurred, a fall of 5.8 per cent on the previous month.

This report rounds off a difficult third quarter for many businesses, as the government’s furlough policy started to require employers to provide greater contributions towards their employees’ salaries, and the moratorium on debt enforcement came to an end.

As identified in the Administration List report for August, construction and retail continued to suffer in September, while transport deteriorated drastically, with twice as many businesses in the sector going into liquidation entirely, as compared to the previous month. In the case of construction, this impact has potential spill-over effects with the real estate sector, which also experienced a number of administrations and liquidations during the month.

Report of companies listed with Administration List as having appointed administrators or liquidators during September 2020. Data from www.administrationlist.co.uk

Construction experienced a high volume of insolvencies in September, a trend also seen in August. This sector has been particularly vulnerable since lockdown started, since it is more labour-intensive and is proportionately affected by the social distancing requirements as a result. Engineering businesses showed a more solid performance, with half as many insolvencies in September, but transport and manufacturing weakened.

Retail businesses recorded a lower level of insolvencies, but the sheer volume of them remained high enough for retail to be the second-weakest sector according to our findings. This sector is heavily dependent on high levels of footfall, and an easing in lockdown restrictions may have just helped turn things around for many retailers.

Even so, the level of insolvencies remains high, suggesting that many businesses in this sector are vulnerable and any further restrictions could worsen the picture.

Report of companies listed with Administration List as having appointed administrators or liquidators during September 2020. Data from www.administrationlist.co.uk

On a month-on-month basis, construction saw a significant leap in liquidations. We recorded 41 instances of liquidation procedures in this sector, compared to 35 in August, equivalent to an increase of almost 20 per cent. Transport saw almost twice as many liquidations in September compared to the previous month, rising from 13 to 21 cases.

Many of the liquidations in transport stemmed from businesses concentrated in freight transport by road especially.

Much of the improvement in retail came from falling liquidations, which, as we suggested, may stem from the easing in restrictions for retailers over the past few months. Even so, as aforementioned, retail remains one of the laggards of the pack. Just last month, we reported on how the New Look chain was facing imminent administration, while its CVA proposals were under review by creditors.

In the end, New Look’s proposals were granted and the chain lives to fight another day, but it shows how even some of the largest brands were on the brink of collapse.

Comment

Stephen Ideh, Director of Administration List, commented on the latest figures:

“Retail and construction are still a soft spot, even with the continued easing of lockdown restrictions in September. While the government-led Eat Out to Help Out scheme officially ended in August, restaurants decided to offer discounts of a similar size in September, which may have helped boost overall footfall up and down our high streets. Even so, the sheer number of insolvencies in retail suggests shoppers aren’t coming back in droves just yet.

“Construction takes the top spot as the weakest sector in our latest estimates. The demand that’s required to sustain this labour-intensive industry just isn’t enough to stop businesses going under and jobs being lost. This is already having a knock-on impact on real estate and beyond.

“One of the more upbeat stories from this latest report is the turnaround seen in engineering, with just over half as many insolvencies as the previous month. Potential bottleneck issues we identified in our last report may have simply been a transitory summer trend.

“Something to look out for in the weeks and months ahead is how each sector acclimatises, once the Coronavirus Job Retention Scheme winds down in late October.

“Many businesses may be prepared to take on the financial responsibilities required of them, but others may buckle under pressure. If this latest report shows the economy at its best, retail, construction and manufacturing have a lot of work to do, if conditions tighten from here.”

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