Insolvency Figures For First Quarter Of 2017

Published 14 March 2017

The latest Insolvency Service figures for corporate and personal insolvencies for the first quarter of 2017 have been issued.  As regards companies, a comparison with the previous quarter is distorted by the 1,796 personal service companies (“PSCs”) that entered liquidation in that quarter.  Excluding these companies, corporate insolvencies rose 4.5% compared with Q4 2016, and were 5.3% higher than the same quarter last year.  This is the third successive quarter that the numbers have increased.

The continued forbearance of creditors, low interest rates and a growing economy are helping to keep corporate insolvencies at near record lows but Brexit and the resultant devaluation of sterling and the Bank of England forecasting a downturn in economic growth means that there are still challenging times ahead for business owners.

Personal insolvencies rose 6.7% compared to Q4 2016, and were 15.7% higher than the same quarter last year, largely driven by an increase in Individual Voluntary Arrangements (“IVAs”), making the quarter the highest since Q2 2014.  Of concern is the increase in the number of bankruptcies which has been made easier and cheaper for debtors to file for their own bankruptcy with the new online procedure avoiding the need to attend court.

Compared to a few years ago personal insolvencies are still relatively low but individuals will start to feel, if they have not already, the effects of rising inflation and a slowdown of real wages growth.

What is not recorded is the number of individuals entering non-statutory debt management plans and R3, the insolvency professions trade association, is calling for a register of debt management plans which would allow a far better understanding of the personal insolvency landscape.

  No. in quarter % change on previous quarter % change on same period last year
Corporate - Total Companies 3,967 -29.10 5.30
Company Liquidations 3,529 -31.60 4.80
Receiverships 0 0.00 0.00
Administrations 357 2.10 13.00
Company Voluntary Arrangements 81 -1.20 -3.60
Personal - Total Individuals 24,531 6.70 15.70
Bankruptcies 3,873 1.30 3.70
Individual Voluntary Arrangements 14,539 12.50 35.20
Debt Relief Orders 6,119 -2.00 -9.00

Source: Insolvency Service and Companies House

Corporate

Both creditor voluntary liquidations and compulsory liquidations saw an increase this quarter compared with last (excluding the 1,796 PCSs discussed above) and were also higher than in Q1 2016.  It is worth noting that the first quarter of any year usually sees a rise in the number of insolvencies as business owners assess the previous year’s results and the prospects for the coming year.

Administrations were slightly up by 2.1% compared to the previous quarter but 13% up compared to the same period last year. In real numbers this means that 41 more companies entered Administration in Q1 2017 than in Q1 2016.  Conversely Company Voluntary Arrangements were down in the same comparative periods reducing by 1 on the previous quarter and 3 on the same period last year.  The number of CVAs continues to remain very low compared to other forms of corporate insolvencies and compared to IVAs. 

Figure 1: Company insolvencies in England and Wales (quarterly data, seasonally adjusted)

Source: Insolvency Service and Companies House. Excludes CVLs following administration.
*The unusually high level of insolvencies and creditor voluntary liquidation in Q4 2016 was caused by a one off event of 1,796 connected personal service companies entering insolvency that quarter following changes to claimable expenses rules.

Personal

As mentioned above, personal insolvency increases have been driven by more individuals entering into IVAs which are back to levels seen in early 2014. Why the numbers have increased is difficult to assess, it may be because IVA provider firms are making it easier to enter into such arrangements or that individuals are switching from non-statutory debt management plans to more formal IVAs.

As a percentage of the adult population, Q1 saw the fourth consecutive increase in personal insolvency rates but still significantly below that seen during 2010.

In the 12 months ending Q1 2017, 1 in every 492 adults became insolvent, slightly up on the previous quarter, however, personal insolvency rates are now at levels seen in 2006 but are still twice the rate they were historically before the credit boom of the early 2000s.

Figure 2: Individual insolvencies in England and Wales (quarterly data, seasonally adjusted)

Source: Insolvency Service