The number of business insolvencies fell to below 4,000 in the second quarter of 2015 for the first time since 2007, according to official figures released today.
It is the fifth successive quarter that insolvencies have declined. In total there were 3,908 corporate insolvencies in the three months, 2.9 per cent less than the previous quarter and 7.5 per cent lower than the same quarter in 2014. The decrease was largely driven a fall in the number of compulsory winding up orders, which were down 15.4 per cent on the previous quarter.
While the number of administrations and Company Voluntary Arrangements were both down from last quarter, while receiverships rose slightly. The figures also show that nearly two-thirds of all company insolvencies are now creditor’s voluntary liquidations (CVLs), where business owners approach licensed insolvency practitioners for advice as to their companies’ finances and decide that a liquidation process is required.
Richard Wolff, North West chair of the insolvency trade body R3 and Head of Corporate Recovery and Insolvency at JMW Solicitors LLP, said: “Levels of corporate insolvency are continuing to fall from recessionary levels as record low interest rates and reluctance to chase on the part of creditors have given businesses an easier time than might usually have been expected following a recession.
“However, the economic status quo will it seems not last much longer as the increasing likelihood of interest rate rises and mounting inflationary pressures could provide a stern challenge for companies already on the brink of insolvency.
“It is interesting to note the high proportion of Creditor Voluntary Liquidations which would seem to indicate that directors are taking matters into their own hands and proactively seeking advice from insolvency professionals in relation to their business difficulties rather than simply waiting for the creditor axe to fall.”
The figures from the government’s Insolvency Service cover insolvencies in England and Wales.
The number of personal insolvencies fell to 18.866, 9.1 per cent lower than the previous quarter and 29.3 per cent lower than the same period in 2014. The figures include people entering bankruptcy, Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs). The insolvency rate which stood at 0.19 per cent of the adult population was the lowest since 2006.
Richard Wolff added: “The return of rising wages in real terms has contributed to a sharp drop in personal insolvency numbers in the past year. Individual Voluntary Arrangements, which are often a good indicator of people struggling with the cost of living, have fallen dramatically: a year ago they were at a record high; today they are back at levels last seen in 2006.
“It has certainly taken a long time, but with wages outstripping inflation again, people are finding it easier to repay their debts without resorting to formal insolvency procedures.
“Could it really be the case that the wave of insolvencies caused by the pre-recession credit boom has finally come to an end?”