UK Company Insolvency Maintain their Downwards Trend

The latest insolvency figures for the first quarter (Q1) of 2016 reveal that despite a small rise on the last quarter, company insolvencies are maintaining their downwards trend. The statistics show a fall in the number ofshutterstock_126022019 companies entering insolvency of 3.6 percent when compared to the same period last year. However, there is a 5.4 percent rise on Q4 2015.

This upswing in the number of company insolvencies represents the first quarterly increase since Q1 2014. The official Insolvency Service statistics show this came as a result of a rise in the number of compulsory liquidations. Compulsory liquidations are currently at their highest level since Q1 2015.

Despite the recent surge in compulsory liquidations, insolvency experts believe 2016 will at least equal last year’s record low for administrations. They also expect the number of insolvencies as a whole to maintain its downward trend amidst favourable economic conditions.

The headline findings

The key findings for Q1 2016 are as follows:

• Company insolvencies increase

Overall, the number of company insolvencies has increased for the first time since Q1 2014. 3,694 companies entered insolvency in Q1 2016, 5.4 percent more than Q4 2015. However, year-on-year figures fell by 3.6 percent.

• Compulsory liquidations increase

804 companies were subject to a compulsory winding-up order in Q1 2016. This represents a 36 percent increase on the previous quarter, but an 11 percent decrease year-on-year. The rise in compulsory liquidations was the main reason for the overall increase in company insolvencies.

• Creditors’ voluntary liquidations remain stable

The number of creditors’ voluntary liquidations is very similar to the last quarter and figures for the same time last year. An estimated 2,515 companies entered creditors’ voluntary liquidations in Q1 2016. That’s a 0.8 percent increase on the previous quarter and a 0.6 percent rise when compared to the same period last year.

• Company voluntary arrangements and administrations reach new lows

Company voluntary arrangements (CVAs) have reached their lowest level since Q1 1998. There were an estimated 75 CVAs in Q1 2016, representing a 7.4 percent decrease from the previous period and a 12.8 percent fall in the same period last year.

There were an estimated 301 administrations during the period, the lowest level since Q4 2003. The decrease on Q4 2015 was 11.1 percent, and 10.9 percent year-on-year. There were zero administrative receiverships in Q1 2016.

• The lowest liquidation rate ever

The liquidation rate for Q1 2016 was at its lowest rate since comparable records began in Q4 1984. The estimated liquidation rate for the 12 months ending Q1 2016 was just 0.42 percent of active companies.

What do the company insolvency figures tell us?

Phillip Sykes, the president of the insolvency trade body R3, commented on the Insolvency Service statistics. He said: “Corporate insolvency numbers last rose at the start of 2014, and despite the rise this quarter, numbers are still well below where they were this time last year.

“It should be noted though, that the rise is driven by compulsory liquidations, which indicates that creditors, probably including HMRC, are beginning to lose patience with customers who are not paying their debts.

“At the same time, it is interesting to see that the estimated liquidation rate is at its lowest level since comparative records began in 1984. This is a sign of the continuing strength of the economy.
“There has been a drop in the number of administrations which may be down to the increasing move by the insolvency profession and lenders to embrace restructuring outside of formal insolvency processes.
“Creditor Voluntary Arrangements are their lowest since 1998. These are primarily used by the retail sector, and until headlines this week, there hadn’t been a large number of retail failures at the very start of the year.”

If HMRC is threatening legal action and or a winding up petition, then you must act quickly as quite often we can rescue businesses even at this late stage. Contact us now to see how we can help, and you can check what other directors have said about us on our testimonial page.

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