Insolvency statistics what do they tell us?

The latest insolvency statistics for England and Wales published by the Insolvency Service for Q3 of 2013 show that there were 3,875 corporate liquidations in Q3 of 2013, down 2% on the same period last year and also down 2.6% on Q2 of 2013. In addition, there were 253 receiverships, 544 administrations and 152 Company Voluntary Arrangements (CVAs), which in total represents a decrease of 3.8% on the same period a year ago.

Personal insolvencies totalled 26,030 during Q3 of 2013, a decrease of 7.3% on the same period last year but up 8% on Q2 of 2013. This was made up of 6,004 bankruptcies (down 21.4% on the same quarter last year), 6,632 Debt Relief Orders (DROs) (down 14.7% on the corresponding quarter last year) and 13,394 Individual Voluntary Arrangements (up 5.7% on the same quarter last year).

So what does this mean? Usually economic recovery will signal a rise in corporate insolvencies so the decline in the corporate figures seems at first sight surprising. However the summer quarter has historically been a quiet time for insolvency and the continuing low interest rates may be assisting companies in fending off creditor pressures in the short term. Whether this quarter’s figures represents a ‘blip’ rather than an indicator of an underlying trend remains to be seen.

The personal insolvency figures may also not tell the whole story. The decline in bankruptcies and DROs would seem to indicate that fewer people needed to make use of those processes, although the truth may be that for many people, their debts are too high to make use of the DRO process (which is available only where a person’s debts do not exceed £15,000) but they cannot afford the costs of making themselves bankrupt (which can be £700). The increase in IVAs would seem to indicate that the increasing costs of living are beginning to bite and decrease people’s ability to pay down debts.

All the more reason to seek early advice whether in a corporate or personal capacity, so that the appropriate steps can be taken to put in place the right process to take advantage of the improving economic climate.