The Insolvency Service has released the latest statistics on company insolvency for the final quarter (Q4) of 2015, and the results make good reading for UK businesses. The data takes into account all those businesses that have been unable to pay their debts from October to December 2015, and have entered into liquidation, administration or some other company rescue process as a result.
The main message for the quarter is that company insolvencies have reached their lowest level since 1989, when the UK was under a Margaret Thatcher government. This decrease was driven primarily by a fall in compulsory liquidations, which have reached their lowest annual total since 1981.
The key Insolvency findings for 2015
The headline results for the year include:
A significant reduction in company insolvency – Company insolvency has reached its lowest level since 1989. In 2015, an estimated total of 14,629 companies entered into insolvency in 2015, representing a 10 percent drop on 2014. This is the lowest annual total since 1989, when just 10,456 companies entered into insolvency. This is the latest in a continuing trend of falling insolvency levels since 2011.
Compulsory liquidations decrease dramatically – The low level of company insolvencies for the year was driven by a significant fall in the number of compulsory liquidations. A total of 2,874 companies were subject to a compulsory winding-up order in 2015, a 23 percent decrease on figures for 2014. This was the lowest number of compulsory liquidations since 1981.
A fall in creditors’ voluntary liquidations – There was also a year-on-year fall in the number of creditors’ voluntary liquidations (CVLs) in 2015. An estimated 9,981 companies entered into a creditors’ voluntary liquidation in 2015, 4 percent less than in 2014. This pushed CVLs to their lowest level since 2007.
Company insolvencies fell across the board – The trend of falling company insolvencies continued across the board. There were an estimated 1,406 company administrations – 11 percent fewer than last year, and 357 company voluntary arrangements – a 35 percent decrease on figures for 2014.
The liquidation rate hit new lows – The liquidation rate of active companies hit its lowest level since comparable records began in 1984. In 2015, just 0.44 percent of active companies were liquidated.
Company insolvencies by industry
The company insolvency figures by industry are presented with a lag of one quarter due to the data collection methods, so the following are the results for July to September (Q3) 2015.
Once again, the highest number of company insolvencies for the period was in the construction sector. In fact, the five sectors to experience the highest number of insolvencies were the same as they have been since Q1 of 2012, albeit in a different order. They were as follows:
2. Wholesale and retail
3. Repair of motor vehicles and motorcycles
4. Administrative and support service activities
5. Accommodation and food service activities
Reaction to the results
Commenting on the Insolvency Service’s latest company insolvency results, Phillip Sykes, the president of the insolvency trade body R3, said: “Corporate insolvencies are continuing their slow and steady decline since their peak in the recession.
“The falling price of a barrel of oil has helped businesses to bring down costs. However, it is causing a considerable degree of difficulty for those in the sector. While many oil and gas businesses are currently undergoing a period of restructuring, if they are unable to cut costs sufficiently we may see a wave of insolvencies in the sector in future quarters, particularly among the smaller firms.”
“Other businesses are continuing to enjoy favourable circumstances with the low interest rates and inflation. There has been reasonable growth in the economy and high levels of liquidity which will have helped buoy businesses along.”