The latest company insolvency figures released by the Insolvency Service make pretty good reading for businesses across England and Wales. The statistics for the second quarter of 2015, for the period April to June, reveal that corporate insolvencies are at their lowest level since the final quarter of 2007. The main driver behind this decrease was the marked drop in the number of compulsory liquidations, which fell to its lowest level since 2013.
The latest company insolvency data takes into account all those companies that are unable to pay their debts and subsequently enter liquidation, administration or some other company rescue process as a result.
The headline findings
The key findings from the Q2 2015 company insolvency statistics are as follows:
Company insolvencies in England and Wales have fallen to their lowest level since Q4 2007. In total, 3,908 companies entered into a formal insolvency last quarter, representing a 2.9 percent fall on Q1 2015, and a 7.5 percent reduction when compared to the same period last year. This continues a decreasing trend in company insolvencies which began in 2013.
Compulsory liquidations are at their lowest level since the end of 2013, with a total of 765 companies subject to a winding-up order in Q2 2015. That’s a 15.4 percent reduction on the figures for the last quarter, and a 21.9 percent year-on-year reduction.
Creditors’ voluntary liquidations remained stable during the quarter. In total, 2,470 companies enter into a creditors’ voluntary liquidation in Q2 2015. That’s a 0.5 percent increase on the previous quarter, but a 2.3 percent reduction when compared with the same period last year.
While receivership appointments increased for the period, company voluntary arrangements (CVAs) and administrations fell. In fact, the number of receivership appointments rose by 12 percent on the previous quarter, but fell by 7 percent when compared to the same period last year. There were only 91 company voluntary arrangements, representing the lowest quarterly number since 2007. The number of company administrations fell by 1.2 percent from the previous quarter, but rose year-on-year by 4.8 percent.
Overall, the liquidation rate in the 12 months to the end of Q2 2015 is at its lowest level since comparable records began in 1984. Just 0.48 percent of active companies have been liquidated in the last three months.
Company liquidations by industry
Once again, the highest number of liquidations for the quarter occurred in the construction sector. Although the sector experienced a reduction of 6.8 percent for the last 12 months, there were still 2,250 liquidations in the industry. This was comprised of 588 compulsory liquidations and 1,622 creditors’ voluntary liquidations.
The same five sectors have been at the top of the liquidation league table since 2009, although they have changed their order amongst themselves.
To the second quarter of 2015, the leading company liquidations by industry were as follows:
1. Construction (2,250 liquidations)
2. Wholesale and retail (1,926 liquidations)
3. Accommodation and food service (1,367 liquidations)
4. Administrative and support service (1,340 liquidations)
5. Manufacturing (997 liquidations)
A slow decline in corporate insolvencies
Commenting on the statistics, Phillip Sykes, the president of the insolvency trade body R3, said: “Corporate insolvencies continue their long, slow decline from their peak in the recession. Record low interest rates and creditor forbearance have given businesses an easier time than might have historically been expected after a recession.
“However, these factors will not last forever. Rising interest rates are looking more likely and could prove to be a big test for those businesses already on the edge. And there are still plenty of businesses that are just about able to service their debts but have no capacity to repay the capital outstanding on their loans.”
Written by: Mike Smith