Insolvency Figures Latest
Quarter 4 2011 - Published 3 February 2012
Last Friday saw the publication of the latest Insolvency statistics published by The Insolvency Service for quarter four of 2011, revealing that other than for compulsory liquidations, corporate insolvencies were down on the previous quarter but higher than the same quarter a year earlier. Looking at liquidations, the numbers have steadily increased through the year of 2011 with 16,871 companies entering into liquidation through the year, 5% more than in 2010. Other corporate insolvency procedures continue to ebb and flow in terms of each quarter’s numbers and overall there is no clear momentum either up or down in the numbers released this quarter.
There were 119,850 individual insolvencies in England and Wales in 2011, a decrease of 11.3% compared to 2010. Bankruptcy numbers continued to decline being some 27.3% less than the same quarter last year but this good news is tempered against an 18.3 % increase in the number of Debt Relief Orders compared with twelve months earlier.
Despite the numbers appearing to show business failures on the increase compared with last year, the latest Business Distress Index published by R3, the insolvency professions trade association, is showing that in December 2011, 58% of businesses reported feeling ‘signs of distress’ down from 68% on the previous quarter and a significant 19% down on a year ago (77%). The expected widespread corporate insolvencies have not occurred and R3’s research indicates that businesses are starting to recover from the downturn. Are we starting to see some signs of recovery in the economy but could this recovery be stifled by the “zombie companies” discussed later in this Newsletter?
| No. in quarter | % change on previous quarter | % change on same period last year | |
|---|---|---|---|
| Company Liquidations | 4,260 | 0.4 | 7.2 |
| Receiverships | 324 | -13.4 | 7.3 |
| Administrations | 658 | -2.2 | 2.5 |
| Company Voluntary Arrangements | 191 | -7.3 | 12.4 |
| Bankruptcies | 8,626 | -9.8 | -28.3 |
| Individual Voluntary Arrangements | 13,047 | 9.0 | 4.5 |
| Debt Relief Orders | 7,300 | -4.0 | 18.3 |
Source: Insolvency Service and Companies House
Corporate
As can be seen from the graph below (Figure 1) the number of company liquidations continues to run well below the highs of 2009 but are still at a constant level of between 4,000-4,500 each quarter. There is no reason to think that there will be any drop off in these levels for the rest of 2012.
Reference was made in the last quarter’s Newsletter to Company Voluntary Arrangements and this rescue procedure is still proving popular. From our experiences we believe that there is a level of sympathy amongst creditors and a willingness to help struggling businesses and therefore a CVA may be more appropriate now than at any time in recent years for companies to consider as a way of solving financial difficulties.
In the twelve months ending Q4 2011, approximately 1 in 138 active companies (or 0.7% of all active registered companies) went into liquidation, unchanged from the previous quarter. As Figure 3 below shows, the liquidation rate remains low compared to a peak of 2.6% in 1993, and the average of 1.2% seen over the last 25 years. It should be noted that the number of active companies has changed considerably over this period; there were 2.4 million active registered companies in Q4 2011; this compares with only about 900,000 in the early 1990s and less than 800,000 in 1986.
Source: Insolvency Service and Companies House (numbers in '000s)
Personal
There were 28,973 individual insolvencies in England and Wales in the fourth quarter of 2011. This was a decrease of 5.6% on the same period a year ago.
This was made up of 8,626 bankruptcies (which were down 28.3% on the corresponding quarter of the previous year), 13,047 Individual Voluntary Arrangements (IVAs), (which were up 4.5% on the corresponding quarter of the previous year) and 7,300 Debt Relief Orders (DROs), (which were up 18.3% on the corresponding quarter of the previous year). In April 2011 a change was introduced to Debt Relief Order legislation to allow those who have built up value in a pension scheme to apply for debt relief under these provisions; this will have increased the overall numbers of those eligible to apply for a Debt Relief Order, and is also expected to have had some impact on the numbers of bankruptcy orders.
As the graph at Figure 2 below shows, the overall number of personal insolvencies continues to decline but as was reported in The Mail recently payday loan companies are targeting women who represent half of all individuals becoming personally insolvent. Statistics from R3 estimate that 500,000 women plan to take out payday loans in the next six months.
In the twelve months ending Q4 2011, approximately 1 in 366 people became insolvent. This is down from 1 in 361 in the previous quarter. As Figure 3 below shows, the individual insolvency rate had displayed a steeply upward path (with some fluctuations) since 2004 and is currently still elevated compared to the annual average of 1 in 1600 (0.1%) people seen over the last 25 years. This contrasts greatly with corporate liquidations as a percentage of the Register of companies which has shown a marked decrease.
Source: Insolvency Service
Total individual insolvencies for Q2 2009 onwards include Debt Relief Orders, which came into force on 6 April 2009
