…a little classic rock reference there for all our listeners at Radio PCR!

It’s that time of year and the “Stattos” of the Insolvency Service have just published their latest data on company and individual insolvency for the period April to June 2015. Of course, with stats, the devil is in the detail but it will come as no surprise that there continues to be a decline in the number of corporate and individual insolvencies. Company insolvencies have been on a decreasing trend since 2013 and were at the lowest level since Q4 2007 which was just before the start of the 2008 recession.

The full release is available on https://www.gov.uk/government/collections/insolvecy-service-official-statistics but for your ease of reference we have complied our own TOP 10 of key facts from the data so you can dazzle your friends and influence your enemies!

Companies

1. Q2 2015 – 3,908 companies entered into formal insolvency; 2.9% less than previous Q and 7.5% than a year ago. It’s been a decreasing trend since 2013.

2. Only 765 compulsory liquidations in Q2, 15.4% decrease on Q1 and 21.9% less than a year ago and the main driver of overall decrease.

3. No of CVLs stable at 2470 and similarly the 423 Administrations were 1.2% less than Q1.

4. At 159, receivership appointments were up 12% compared with Q1 but still 7% less than last year.

5. 91 CVA in the quarter was the lowest number since Q4 2007.

6. The liquidation rate in 12 months ending June 2015 was 0.48% of active companies – the lowest level since records began at the end of 1984.

People

7. Q2 2015 – 18,866 individual insolvencies 9.1% less than Q1 and 29.3% less than same Q a year ago.

8. At 3,944 the number of bankruptcy orders was 6.3% lower than Q1 and 18.6% lower than a year ago – lowest level since Q4 1990!

9. IVAs at lowest level since Q1 2006 – only 9,090 in Q2, 35.9% less than in same Q last year. IVAs have now decreased for 4 consecutive quarters; previously they were on an increasing trend.

10. 12 months to June 2015 - 1 in 523 adults (0.19% of adult population) became insolvent, the lowest rate since 12 months ending Q1 2006.

So what do the numbers really tell us?

The corporate world is still full of “zombie” companies. These survive because lenders are not being aggressive in foreclosing on loans in default and historically unprecedented low interest rates means currently servicing debt (or the interest element at least) has been possible for many companies when they would have been expected to go to the wall; hence the low numbers of corporate insolvencies.

The rumoured interest rate rises may well be the straw that breaks the camel’s back and finally pushes the zombies over the edge but whether this leads to a huge leap in insolvencies will depend on the extent and timing of the interest rate charges and lenders ultimate appetite for crystallising the losses that would inevitably arise out of insolvency.

For us wage slaves low inflation, falling unemployment and wage rises in a benign economy have meant that people have found it easier to manage their personal finances. The huge fall in IVAs reflects this and possibly the fact that the insolvencies that arose out of the pre 2008 credit boom have now been dealt with. We should however be mindful that the stats do not reflect the number of people in informal debt management plans so the overall position might be skewed.

As with the corporates and perhaps even more so, interest rate rises may impact on personal finances particularly on those households with mortgage payments to meet. So Q3/Q4 may see the decreasing trend reverse especially as new rules making it more expensive to petition for a person’s bankruptcy come into effect and advantage is taken of the current lower costs.

Let’s see. In any event I’ll be back in November with the next quarterly update.

Lee Pryor
Partner

 

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