There were 4,233 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales in the second quarter of 2011 (on a seasonally adjusted basis).
This was an increase of 2.7% on the previous quarter and an increase of 4.4% on the same period a year ago.
This was made up of 1,290 compulsory liquidations (which are up 19.8% on the previous quarter and up 11.1% on the corresponding quarter of the previous year), and 2,943 creditors’ voluntary liquidations (which are down 3.3% on the previous quarter but up 1.7% on the corresponding quarter of the previous year).
Additionally, there were 1,232 other corporate insolvencies in the second quarter of 2011 (not seasonally adjusted) comprising 350 receiverships, 695 administrations and 187 company voluntary arrangements. In total these represented a decrease of 6.0% on the same period a year ago.
INDIVIDUAL INSOLVENCIES
There were 30,513 individual insolvencies in England and Wales in the second quarter of 2011. This was a decrease of 12.2% on the same period a year ago.
This was made up of 11,113 bankruptcies (which were down 25.8% on the corresponding quarter of the previous year), 12,143 Individual Voluntary Arrangements (IVAs), (which were down 9.8% on the corresponding quarter of the previous year) and 7,257 Debt Relief Orders (DROs), (which were up 15.3% on the corresponding quarter of the previous year)
In the second quarter of 2011, 83.0% of bankruptcies were made on the petition of the debtor, broadly comparable to the levels for recent quarters.
The percentage of bankruptcy orders involving trading debts (self-employed bankruptcies) was 20.6% in the first quarter of 2011 (second quarter 2011 figures for trading-related bankruptcies are not yet available), noticeably higher than levels seen in recent quarters.
COMPANY LIQUIDATION AND INDIVIDUAL INSOLVENCY RATES: LONGER-TERM PERSPECTIVE
In the twelve months ending Q2 2011, approximately 1 in 139 active companies (or 0.7% of all active registered companies) went into liquidation, which is unchanged from the previous quarter.
The liquidation rate remains low compared to a peak of 2.6% in 1993, and the average of 1.3% seen over the last 25 years.
It should be noted that the number of active companies has changed considerably over this period; there were 2.3 million active registered companies in Q2 2011; this compares with only about 900,000 in the early 1990s and less than 800,000 in 1986.
In the twelve months ending Q2 2011, approximately 1 in 349 people became insolvent. This is down from 1 in 337 in the previous quarter.
The individual insolvency rate has displayed a steeply upward path (with some fluctuations) since 2004 and is currently elevated compared to the annual average of 1 in 1780 (0.1%) people seen over the last 25 years.
Frances Coulson, R3 President, said:
On Personal insolvency increases:
“The quarter on quarter increase in personal insolvency is regrettable, yet expected, given job cuts and compulsory redundancies being announced in recent months, in both the public and private sector.
"Nearly a third of people (30%) do not have any savings at the moment according to R3’s latest personal debt snapshot, with many households failing to have a contingency plan for any fall in income or increased outgoings.
"Therefore, a swift change in circumstance such as losing a job is likely to have pushed many individuals into insolvency.
“The increase in personal insolvencies is likely to continue; we have seen over recent months living costs rise and high inflation effectively reducing ‘take home’ pay. Added to the fuel hike that will hit families in the winter months, this may be the start of a worrying trend.
“Unfortunately, this data does not capture the figures for those in informal insolvency procedures such as debt management plans so we are unable to get a true measure of how many households are struggling.
"R3 research revealed more than 2 million people have taken out a ‘payday’ loan over the last year, while 53% of individuals are concerned about their current levels of debt.”
On Corporate insolvencies increase for consecutive quarters:
“The consecutive quarter increase in corporate insolvency levels is unsurprising given the latest GDP figures revealing marginal growth of just 0.2%. Despite the economy officially being out of recession for some time the early recovery is sluggish and confidence has not returned to UK plc.
“In recent months we have seen many high-profile retail businesses fall into administration, triggered by ‘Quarter Day’, the traditional time for commercial businesses to pay their next quarter’s rent.
"It revealed that for many retail businesses who hung on through the worst of the recession they simply did not have the funds to meet their rental obligations.
"This is reflective of many businesses in other sectors; they have depleted their reserves to stay afloat and have no contingency plan for additional costs, unexpected outgoings or a fall in sales.”
David Chubb, partner, business recovery services, PwC, commented:
"Although the overall corporate insolvency figures show a slight increase on the same quarter last year, in our view, many businesses are experiencing increasing difficulties in the current economic climate. This is not necessarily reflected in these statistics.
“It seems that there may be a lot of businesses closing down without the need for an insolvency process because they are making
