The number of overall corporate liquidations in England and Wales dropped 2.6% during the third quarter of 2013 compared to the previous quarter.
Official statistics from The Insolvency Service revealed the total was made up of 964 compulsory liquidations, up 0.5% on the previous quarter, and 2,911 creditors’ voluntary liquidations, down 3.5% on the second quarter of 2013, but up 1.2% on the corresponding quarter of 2012.
There was a further 949 other corporate insolvencies during the third quarter, comprised of 544 administrations, 253 receiverships, and 152 company voluntary arrangements.
The figures represent a decrease of 3.8% in corporate insolvencies compared to Q3 2012, and a decrease of 2.57% on the second quarter this year, driven by an increase in receiverships as administrations fell.
Lee Manning, restructuring partner at Deloitte, said: “Looking at the whole of 2013, Deloitte’s own figures revealed the number of businesses falling into administration dropped by 16% to 1,224 for the first nine months of this year.
“However, it would not be a surprise to see a few more well-known retailers struggling with challenges brought about by technology and customers migrating to a stronger offering. We recently saw Blockbuster re-enter administration and the next four months represent a crucial period for retailers. It remains a case of survival of the fittest.
The overall percentage of active companies registered in England and Wales going into insolvency was 1 in 159 (0.6%), down from 1 in 155 from the previous quarter.
John Alexander, partner at Carter Backer Winter, believes the figures indicate either the “historical cycle of business performance during a recession and that a recovery has been destroyed, or the economy isn’t recovering as well as expected.”
He explained: “The pattern established following previous recessions is that more businesses go bust as the economy recovers, not less.
“Typically, businesses that have bad debts slowly wind down during a recession until they eventually run out of cash. Economic growth is often the last straw for companies: they need to fill new orders and recruit more staff to meet demand, but can’t get any more credit.
“The flat-lining/declining insolvency statistics are a poke in the eye to those who claim the economy is recovering well. Contrary to statistics showing that GDP grew by 0.8% in the three months to September, these insolvency figures prove that the UK is still bumping along the bottom of the economic cycle.”
For the first time, The Insolvency Service has also released statistics detailing insolvency levels within UK market sectors.
Labelled as “Experimental Statistics” and covering the 12 months to the end of Q2 2013, the data shows the highest level of corporate insolvencies was in the construction industry (2,976), followed by the wholesale and retail sector (2,137).
Meanwhile, individual insolvencies in England and Wales during the period totalled 26,030, up 1.2% on the second quarter of 2013, but down 7.3% on the same period last year.
The figure was made up of 6,004 bankruptcies, 6,632 Debt Relief Orders (DROs) and 13,394 Individual Voluntary Arrangements (IVAs). The number of DROs issued were higher than total bankruptcies for the fifth quarter running, while bankruptcy orders have been lower than IVAs for the last 10 quarters.
Mark Sands, personal insolvency partner at Baker Tilly said: “The credit binge in the noughties left many people overexposed when the crash came.
“With the lowest levels of personal insolvency for eight years in the first three quarters of this year, it looks as though we might finally be recovering from the hangover. However, the latest increases in unsecured lending might suggest we are being tempted by a “hair of the dog”.
“The increased proportion of people in debt choosing to commit to a five year payment plan using an IVA is telling, as it suggests people are increasingly confident about the prospects for the economy.”