Corporate insolvencies are falling
The latest quarterly statistics have been released by the Insolvency Service revealing the level of personal and corporate insolvencies in England and Wales from July to September 2014. Also included are related statistics for Scotland and Northern Ireland.
The headline statistics for the third quarter show that the number of liquidations in England and Wales has decreased by 11.7% when compared to the same period last year. Furthermore, administrations have decreased by 18.8%, and there has been a further reduction in the number of company voluntary arrangements and receiverships.
Further findings: creditors’ voluntary liquidations
The number of creditors’ voluntary liquidations has remained largely stable when compared to figures for the previous quarter. Creditors’ voluntary liquidations are currently the most common method of winding up an insolvent company in the UK. Initiated by the directors of the company following a shareholder resolution, this type of voluntary liquidation gives directors the time they need to get the company’s affairs in order before they close down.
The number of companies entering a creditors’ voluntary liquidation has increased slightly compared to the previous quarter; however, prior to this increase, there was a marked decrease in the previous four quarters. From July to September 2014, there were 13.3% fewer creditors’ voluntary liquidations compared to the same period last year.
Compulsory liquidations, otherwise known as ‘winding up’, are usually the last resort for creditors trying to reclaim the money they are owed. In the previous two quarters, the number of companies subject to a compulsory winding-up order in the UK has decreased. This is in line with the stable and decreasing trend since mid-2012.
Administrations, company voluntary arrangements and receiverships
The number of companies entering into administration may have fallen by 18.8% when compared to the same period last year, but there has been a sharp rise of 16.9% when compared to figures for the previous quarter.
Company voluntary arrangements and receiverships have both increased slightly compared to the last quarter; however, the trend over the longer term remains level.
The total number of liquidations in the UK for the year ending September 2014 was at its lowest level since 1984, the earliest period when it was possible to calculate the rate.
Increase in business rescue procedures
Commenting on the third quarter results, the president of R3, the insolvency trade body, said: “The long-term corporate insolvency trend is downwards and activity has been very quiet recently. However, it is encouraging to see greater use of business rescue procedures – rather than liquidations – in the last quarter following recent falls.
“Decreasing corporate insolvencies and sustained economic growth do not always go hand-in-hand: counter intuitively, growth can lead to rising insolvency levels.
“Businesses can run into trouble after recessions of economic doldrums – as we’ve experienced for the past five years or so – because they’re simply not ready for growth. If a business can’t invest to support its growth, cash-flow can become a big problem and the business may find itself ‘over-trading’.”
Top tips to stop overtrading
- Make sure communications between sales and invoice administration are in sync
- Ensure regular and frequent meetings take place with the whole team around the table and have the opportunity to air concerns
- If you are a sole director consultant with no employees make sure you are getting paid and setting aside taxes if/when taking dividends
- Never place too much faith in one large debtor/company circumstances can change in an instant leaving your company vulnerable
- Do a company Strengths, Weakness, Opportunities and Threats brainstorm with your team or yourself
- Never commit to new business without looking at the strains on your infrastructure and ability to support the opportunity
If you’re struggling to make ends meet and are facing the threat of a looming corporate insolvency, please contact our team in confidence on 08000 746 757 or talk to Mike directly on 07912 344 394.