Business

Administrations at historic low, says KPMG

The big four firm also said that insolvency appointments in the final quarter of the year were ‘particularly low’

The number of companies going into administration fell to historic lows during 2020, thanks to a rise in government support during the pandemic, KPMG reveals. 

An analysis conducted by the firms restructuring practice showed that 1,112 companies went into administration over the course of 2020 – this is the lowest annual total since KPMG started tracking the data in 2005, and a fall of 22% from 2019, which saw 1,425 administrations.

The big four firm also said that insolvency appointments in the final quarter of the year were “particularly low”, with 216 companies entering into administration from October through December – again, the lowest quarterly total since 2005.

The number of insolvencies seen in the leisure and hospitality industries – which have borne the brunt of the impact of lockdown restrictions – also fell sharply from 49 in Q3 to 27 in Q4. However, this sector still accounted for the “lions’ share of administrations”, alongside building and construction, real estate, and retail. 

Blair Nimmo, head of restructuring for KPMG in the UK, said: “Comfort can be taken from the fact that fewer businesses than expected have been forced into insolvency during the crisis, as the breadth and depth of support measures available, coupled with a supportive lending community, have given organisations that vital lifeline.

“We also know that there are a number of sectors, including the likes of tech, online retail and financial services, which have seen something of a Covid-bounce.”

He added: “We need to be clear, however, that these figures provide a distorted view of reality.  Those businesses that remain in hibernation due to ongoing lockdown measures, such as those in the leisure and hospitality and travel and tourism sectors, continue to accrue liabilities while seeing precious little cash flow into the business. 

“At some point, rent and tax deferrals and loans will need to be repaid. The Job Retention Scheme will unwind. Weaning off these support schemes is going to be a massive challenge for many.”

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