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Personal insolvencies increase in Q2 through IVAs 29 July 2014

The level of personal insolvencies in England and Wales during Q2 2014 (April-June) increased 5.1% since Q1 2014, according to official statistics from The Insolvency Service.

The second quarter statistics revealed there were 27,029 individuals entering insolvency, comprising 14,571 Individual Voluntary Arrangements (IVAs), 7,006 Debt Relief Orders (DROs) and 5,452 bankruptcies.

IVAs represented over half (53.9%) of all personal insolvencies during the period, an increase of 20.3% quarter-on-quarter. IVAs have now reached their highest levels since their introduction in 1987.

Conversely, bankruptcy levels decreased by 4% quarter-on-quarter (15.9% since Q2 2013), while DROs dropped 7% quarter-on-quarter (1.8% year-on-year).

Matthew Chadwick, business restructuring partner at BDO, said: “Today’s rise in individual voluntary arrangements is typical at our position in the economic cycle and need not be cause for alarm. There are many signs of a strengthening recovery including rising wages, record employment figures and increased retail spend: this, paradoxically, is another one of them.

“Now property prices are rising, creditors are more likely to think about recouping long-standing debts. A continuing rise in the number of personal insolvencies in the next 12-18 months is therefore likely.”

Corporate liquidations, administrations, Company Voluntary Arrangements (CVAs) and receiverships all decreased during the second quarter.

There were 974 compulsory liquidations, compared to 7,075 in the first quarter of 2014, representing a 6.3% decrease on the same period last year.

Creditor’s Voluntary Liquidations (CVLs) decreased in number by 5.9% from the previous quarter (Q1 2014: 2,643) to 2,487 – a year-on-year drop of 18.1%.

The corporate liquidation rate in Q2 2014 was at its lowest rate since 1984 – the earliest calculable date.

There were a further 723 other corporate insolvency events during the fourth quarter, comprising 410 administrations, 171 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 to Q2 2014 was 1 in 177 (0.56%), down from 1 in 167 in the 12 months ending Q1 2014.

R3 vice-president Phillip Sykes said: “While administrations and voluntary arrangements have remained at a pretty constant level for the past five or so years, liquidations have fallen gradually since the recession. Although there has been the occasional quarterly jump, things have always fallen back again the next quarter.”

“Other than an improving economy, not much has changed to have a big impact on insolvency numbers. Some sectors, like the legal sector have encountered regulatory challenges, which has led to higher insolvency numbers there, but for everyone else the past few years have been the same story: low interests rates and lenient lenders.”

“An interest rise could cause some businesses extra problems, but it would have to be more than a couple of quarters of a percentage point to make any real difference.”

 

 

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