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Personal and corporate insolvencies are on the rise

Personal Insolvencies

The Insolvency Service has reported that the number of personal insolvencies in the three months to March 2017 were 15.7% higher than a year ago. Personal insolvencies in England and Wales also rose 6.7% from the last quarter of 2016.

Of the 24,531 individual insolvencies in the first quarter of 2017, 59% represented Individual Voluntary Arrangements (IVA’s), 25% debt relief orders and 16% bankruptcies.

It would seem that the increase in personal insolvencies has been driven by further rises in the number of IVA’s which may be due to individuals having easier access to IVA’s rather than an increase in the number of people who are experiencing financial issues.

There has also been a slight increase in the number of individuals filing for bankruptcy which may be due to the introduction of an online application process in April 2016 which has made it easier for people.

The figures do not take into account anyone who is subject to an informal debt management plan as there are no means to record these.

Corporate Insolvencies

Figures have shown that corporate insolvencies rose by nearly 5% in the first quarter of 2017 from the previous three months and they are also about 5%higher than this time last year.

Certain industries are still experiencing a challenging time with the fall in the pound against the euro and dollar, the introduction of the national living wage and the rollout of pension auto-enrolment to smaller firms.

Even though the number of corporate insolvencies has risen, a combination of low interest rates, creditor forbearance and a speedy economy has resulted in insolvency numbers still being close to record lows.

Increase in number of director disqualifications lasting for five years or more
Figures have also shown the number of company directors receiving longer disqualifications has hit a six year high. In 2016, the Insolvency Service disqualified 573 company directors lasting more than five years which is the highest figure since 2010/11.

It would seem that the Insolvency Service is taking tougher enforcement action on issues including the following:-

  • Significant Crown debt outstanding for in excess of 12 months.
  • Accounting issues.
  • Transactions to the detriment of creditors.
  • Phoenix companies and previous company failures.

If you need advice in relation to cash flow issues which you or your company may be experiencing, please contact me.

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