Posted on 7 May 2014
Official statistics from The Insolvency Service revealed that the number of compulsory liquidations in England and Wales increased by 53.1% during the first quarter of 2014 compared with the previous quarter. Altogether, there were 1,072 compulsory liquidations between January and March 2014, compared to 700 in the third quarter of 2013. This also represents a 10.2% increase on the first quarter of 2013.
The overall percentage of active companies registered in England and Wales going into insolvency in the 12 months up to Q1 2014 was 1 in 167 (0.6%), down from 1 in 165 in the 12 months ending Q4 2013.
Total corporate liquidations grew by 4.8% quarter-on-quarter and 4.9% year-on-year. The total also included 2,649 Creditor’s Voluntary Liquidations (CVLs), which decreased in number by 7.1% from the previous quarter (Q4 2013: 2,852) but increased 2.9% year-on-year (Q1 2013: 2,574).
There were a further 884 other corporate insolvency events during the fourth quarter made up of 537 administrations, 205 receiverships, and 142 CVAs (company voluntary arrangements). The figures represent a 2.8% decrease in insolvency procedures compared to the first quarter of 2013.
The Insolvency Service has also released statistics detailing insolvency levels within UK market sectors.
Labelled as “Experimental Statistics” and covering the 12 months to the end of Q1 2014, the data shows the highest level of corporate liquidations was in the construction industry (2,665 – down 5.5% on the previous 12 months), followed by the wholesale and retail sector (2,114 – an increase of 0.6% on the previous 12 months).
Other notable sectors were administration & support services who saw 1,500 liquidations, accommodation & food services with 1,341 liquidations and manufacturing who saw 1,211 liquidations respectively.
Individual insolvencies in England and Wales during the period totalled 24,931, representing a 0.3% decrease on the same period in 2013 and an increase of 2.7% from Q4 2013. This was made up of 5,671 bankruptcies, 6,549 Debt Relief Orders (DROs) and 12,711 Individual Voluntary Arrangements (IVAs).
The number of DROs issued has been higher than the level of bankruptcies for seven consecutive quarters, while IVAs comprised 51% of all individual insolvencies in the England and Wales.
Dean Nelson, Head of Business Recovery & Insolvency at Smith Cooper, warned that “those who have taken tough decisions over the past five years, in reducing overheads and capital expenditure, need to continue to manage their business carefully because although an increase in output and turnover is welcome the resultant demands on cash may present some difficult situations, ultimately impacting the viability of the business as a whole. It is clear that such situations will be a factor should corporate insolvencies continue to increase.”