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Liquidations jump in Q1 29 April 2014

The number of compulsory liquidations in England and Wales increased by 53.1% during the first quarter of 2014, compared with the previous quarter.

Official statistics from The Insolvency Service revealed there were 1,072 compulsory liquidations between January and March 2014, compared to 700 in the third quarter of 2013. The figure represents a 10.2% increase on the first quarter of 2013.

Total corporate liquidations grew by 4.8% and 4.9% quarter-on-quarter and year-on-year respectively. The total also included 2,649 Creditor’s Voluntary Liquidations (CVLs), which decreased in number by 7.1% from the previous quarter (Q4 2013: 2,852) but increased 2.9% year-on-year (Q1 2013: 2,574).

There were a further 884 other corporate insolvency events during the fourth quarter, comprising 537 administrations, 205 receiverships, and 142 CVAs (company voluntary arrangements). The figures represent a 2.8% decrease in insolvency procedures compared to the first quarter of 2013.

The overall percentage of active companies registered in England and Wales going into insolvency in the 12 months up to Q1 2014 was 1 in 167 (0.6%), down from 1 in 165 in the 12 months ending Q4 2013.

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 Q1 2014, the data shows the highest level of corporate liquidations was again in the construction industry (2,665 – down 5.5% on the previous 12 months), followed by the wholesale and retail sector (2,114 – an increase of 0.6% on the previous 12 months).

The administration & support services, accommodation & food services, and manufacturing sectors were the only other industries to see over 1,000 liquidations, with 1,500, 1,341, and 1,211 liquidations respectively.

Giles Frampton, the new president of insolvency trade body R3, said: “For those businesses reliant on a good Christmas period, failure to hit sales targets can lead to problems in January and February. Similarly, with the end of some businesses’ financial year approaching at the end of the quarter, financial difficulties may have come to a head.

“Having fallen from their peak during the recession, corporate insolvency numbers have been relatively stable for a while, although they haven’t fallen as far or as fast as they ordinarily do after a peak.

“Economic recovery is very welcome, but extra activity does put added pressure on businesses that might not have the resources or ability to adapt quickly enough. This might have helped push numbers up from last year.”

Individual insolvencies in England and Wales during the period totalled 24,931, representing a 0.3% decrease on the same period in 2013 and an increase of 2.7% from Q4 2013.

The figure comprised 5,671 bankruptcies, 6,549 Debt Relief Orders (DROs) and 12,711 Individual Voluntary Arrangements (IVAs).

The number of DROs issued has been higher than the level of bankruptcies for seven consecutive quarters, while IVAs comprised 51% of all individual insolvencies in the England and Wales.

Joanna Elson OBE, Chief Executive of the Money Advice Trust, said: “The annualised trend for falling personal insolvencies needs to be understood in the context of a changing debt landscape. Lending to individuals fell between 2009 and 2013 and so the scope for insolvencies has reduced. At the same time we’ve seen a marked increase in people in arrears on household bills.

“The provision of debt help has also undergone change in recent years and this has impacted on the make-up of personal insolvencies, characterised by a marked increase in Individual Voluntary Arrangements (IVAs).

“We have concerns that the increase in IVAs is not reflective of the types of debt problems people find themselves in, but rather of the way in which many debt management companies can most effectively generate income.”

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