Corporate insolvency rates continue to fall

Latest figures from the Insolvency Service indicate that corporate insolvencies are continuing to decline as are personal insolvencies, which are now down to pre-crisis levels, report Harris & Co accountancy services.

The quarterly statistics show there were 3,875 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales Q3 2013, down by 2.6% on the previous quarter, and 2% less than the same quarter a year ago.

Additionally, there were 949 other corporate insolvencies made up of 253 receiverships, 544 administrations and 152 company voluntary arrangements (CVAs). In total these represented a decrease of 3.8% on the same period a year ago.

Maurice Moses, EY partner, restructuring, and a council member of the Insolvency Practitioners Association, said: ‘My feeling is that the banks are in better control of their lending and are managing problems quite well. Boards of directors have also been through various rounds of cost control and have adjusted to the current environment as “normal”. Many banks have also been able to avoid enforcement / insolvency of their customers by selling distressed debt portfolios - although this is unlikely to have impacted the SME market.’

Q3 2013 saw 26,030 individual insolvencies in England and Wales, a decrease of 7.3% on the same period a year ago. While the number of bankruptcies (6,004) was down 21.4% on the corresponding quarter of the previous year, and the level of Debt Relief Orders (DROs) also fell by 14.7% to a total of 6,632, there was an increase in the number of Individual Voluntary Arrangements (IVAs), which rose by 5.7% to reach 13,394.

Commenting on the increased use of IVAs, Mark Sands, personal insolvency partner at Baker Tilly said: ‘On the face of it, this suggests a growing confidence in the economy, as people in debt feel able to commit to a five year payment plan rather than declaring themselves bankrupt and simply trying to walk away from the problem. However, the trend could reflect the drip drip impact of pay not keeping pace with inflation. Those who were once able to service their debts and credit card bills are finding the squeeze on their disposable income so great they are forced into doing a deal with their creditors.’

For the first time, the Insolvency Service has produced a breakdown of corporate insolvencies by industry category, which shows that in the 12 months ending Q2 2013, the highest number of total liquidations was in the construction sector (2,976). This comprised 833 compulsory liquidations and 2,143 CVAs.

The second highest number of 2,137 liquidations was seen in the wholesale and retail sales sector (382 compulsory liquidations and 1,755 CVAs). These were the only two sectors to experience more than 2,000 total liquidations in the 12 months ending Q2 2013