Company insolvencies fall to lowest level in more than 25 years
- Credit: PA
Company insolvencies across England and Wales fell last year to the lowest level in more than a quarter of a century, according to figures released today.
The Insolvency Service said that an estimated 14,629 companies entered into insolvency during 2015, representing a 10% redcation compared with 2014 and the lowest annual total since 1989.
The fall, continuing a downward trend seen since 2011, was mainly driven by a decrease in compulsory liquidations, with a total of 2,874 companies being the subject of a compulsory winding-up order in 2015, 23% down compared with 2014 and the lowest annual total since 1981.
The number of creditors’ voluntary liquidations fell to its lowest since 2007, with an estimated 9,981 companies entering into a creditors’ voluntary liquidation last year, a 4% decrease compared to 2014.
Other types of company insolvency also continued to fall, with an estimated 1,406 administrations in 2015, which 11% lower than in 2014, and at the lowest level since 2003 (when changes to administration resulting from the Enterprise Act 2002 took effect), and there were 357 company voluntary arrangements in 2015, a fall of 35% compared to 2014 and the lowest total since 1994.
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Personal insolvencies meanwhile fell to 79,965 last year, 19% down on 2014 and the lowest annual total since 2005, with bankruptcies, debt relief orders and individual voluntary arrangements all showing a reduction year-on-year.
Frank Brumby, eastern region chairman of insolvency trade body R3 and a director at Isadore Goldman in Norwich, said: “Corporate insolvencies are continuing their slow and steady decline since their peak in the recession.
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“The falling price of a barrel of oil has helped businesses to bring costs down. However, it is causing a considerable degree of difficulty for those in the sector. While many oil and gas businesses are currently undergoing a period of restructuring, if they are unable to cut costs sufficiently we may see a wave of insolvencies in the sector in future, quarters particularly among the smaller firms.
“Other businesses are continuing to enjoy favourable circumstances with the low interest rates and inflation. There has been reasonable growth in the economy and high levels of liquidity which will have helped buoy businesses along.
“R3’s latest research which tracks indicators of business distress, found levels at the lowest level since our study began in March 2012.
“A word of warning, though: these factors won’t last forever. Increasing volatility in the stock markets, driven by concern over China, lower growth in the developing world and geopolitical risk in the Middle East all contribute to a time of uncertainty and lower confidence amongst corporates which may impact growth in the foreseeable future.”
On personal insolvencies he said: “It’s welcome that insolvency numbers have fallen so far from their 2010 peak in 2015. Continuing low inflation and a growing economy have helped people pay down or service debts. The return of real wage growth has put a big dent in insolvency numbers.
“Quarterly insolvencies have been boosted by October changes to Debt Relief Orders, which have made the insolvency regime more accessible to people in financial trouble. A rise doesn’t only mean more people are becoming insolvent, it means more people are now able to access the formal insolvency regime.
“Increasing access is a positive thing. There are hundreds of thousands of people using non-statutory debt management plans to deal with problem debts who might be better served using a formal insolvency process.
“Often, people can’t afford the government and court fees needed to enter bankruptcy, or they have too many assets and debts to use a DRO, or they just don’t know about their options. Making DROs easier to access may have allowed people to enter the formal regime for the first time. The rise in DROs looks like it has come more from people in this position, rather than switching from bankruptcy or an IVA.”
He added: “Overall, personal finances are in a better shape than they have been for a while. R3’s regular survey of 2,000 British adults has found that the proportion of British adults who say they often or sometimes struggle to payday is at a record low of 36%. Two-in-five British adults say they are at least fairly worried about their current level of debt which is down from 2015.”