The latest insolvency statistics have been released and they show a mixed picture for businesses and individuals in England and Wales. As corporate insolvencies have risen compared to the last quarter, individual insolvencies have fallen despite increased levels of household debt.
Company insolvencies in quarter two increased by 12.6% on the previous quarter but according to official stats from the Insolvency Service, this is likely to have been as a result of 1131 connected personal services companies (PSCs) entering into creditors voluntary liquidations (CVL) due to changes in the claimable expense rule.
However, if you discount these connected companies, the number of companies that entered into insolvency in the second quarter actually fell by 15.4% compared to Q1 and when compared to Q2 in 2016, the figure fell by 4%; this gives Q2 2017 the lowest quarterly figure for companies entering insolvency since records began in 2000.
Of the 4547 companies which entered into insolvency in Q2, 76% (3454) were CVL’s a 16% drop on those who voluntarily liquidated their company in Q1. 15% (672) of company insolvencies were compulsory liquidations where a company has been forced into liquidation via a winding up petition from a creditor; this is 19.8% lower than Q1 but 0.1% higher than the same quarter last year.
Other forms of insolvency, such as administration and company voluntary arrangements (CVAs), accounted for 9% of all companies who entered into insolvency in Q2; again these figures are lower than the same quarter last year but it remains in line with medium term trends for these options.
With rising inflation and uncertainty surrounding Brexit causing concern for many businesses across the country, it seems many companies are still turning a profit and not finding themselves in a position where they need to enter into an insolvency option.
For personal insolvencies, the total number of 22,772 insolvencies was 9.7% lower than in Q1, returning to the levels seen in 2016. This was mainly due to a decrease in individual voluntary arrangements (IVAs) which fell by 15.6% from Q1 to Q2 however IVAs still accounted for the largest proportion of personal insolvency measures with 12,854 entered into in Q2.
Bankruptcies work slightly differently as you can voluntarily enter into one or you can be made bankrupt by a petitioning creditor. As a result of the change to the bankruptcy process, which took the application online, there has been a 10.3% rise in applied for bankruptcy from April 2016 to now while creditor petition bankruptcies fell by 13.3% between Q2 2016 and Q2 2017 putting them at their lowest level in 14 years.
While applying for your own bankruptcy has risen over the last year, bankruptcies still made up the smallest percentage of personal insolvency options at 17% in Q2 2017 which shows that bankruptcy is still seen as a last resort by many who are in debt.
Debt relief orders (DROs), which are a low cost alternative to bankruptcy, rose slightly in popularity from Q1 to Q2 increasing by 0.4%. With 6,146 DROs entered in Q2, this is the second lowest level since changes to the eligibility criteria took effect in October 2015.
Despite the warnings from the Bank of England and debt charities regarding the rising levels of household debt across the country, this does not yet seem to have taken any effect on the personal insolvency figures. However, whether this changes over the coming months, particularly as Christmas and Brexit approach, still remains to be seen.