7 Feb 2014 04:03pm

Insolvencies at 8 year low

Personal insolvencies have fallen to the lowest level in eight years

The latest figures published today show that there were 101,049 individual insolvencies in England and Wales last year, down by 7% on 2012. This included 24,536 bankruptcies (down 22.8% on 2012), 27,546 Debt Relief Orders (DROs) (down 11.7% on 2012) and 48,967 Individual Voluntary Arrangements (IVAs) (up 4.9% on 2012).

Comparing the whole of 2013 with the same period in 2012, company collapses dropped by 9.2%.

Despite a drop across the board insolvencies are still significantly higher than they were before the financial crisis.

Graham Bushby, Baker Tilly’s head of restructuring and recovery said the figures “don’t really paint a true picture of UK corporate health.”

He said recent research from the Bank of England “suggests that 14% of banks’ lending to SMEs is subject to some kind of forbearance – whether in the form of loan term extensions, payment holidays, or transfers to interest only deals, so there is clearly a significant degree of distress still being felt by some businesses, despite the recent upturn in the economy.”

Law firm Wilkins Kennedy notes that the growth of the payday loans and debt management industry means that many individuals that are effectively bankrupt are not caught by these figures.

Louise Brittain, insolvency partner at Wilkins Kennedy said, “we know that massive and highly targeted marketing campaigns are attracting more and more individuals into using Debt Management Plans and pay day loans as ways to manage their debts.”

“In many cases the arrangements are rolled over from one month to the next, and because of the punitive interest or high, front-loaded fees, very little capital is repaid and the individual’s financial difficulties get worse, not better.”

Mike Jervis, business recovery partner at PwC, said the quarter's low level of insolvency has been driven by the “availability of investment funds to help bring companies back from the brink of collapse. Hedge funds and distressed venture capital funds are the busiest part of the restructuring community.

"The insolvency levels in the UK compare very favourably to other eurozone economies, notably Spain and Italy, where the insolvency trend is still rising.

"I expect the decrease in UK insolvencies to continue during 2014. However, companies should not be complacent: management of cash is a key factor as the economy achieves its own turnaround."

Raymond Doherty


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