Q1 2017 insolvency statistics for England & Wales, published by the Insolvency Service, have shown a rise in both personal and corporate insolvencies.
The statistics show that corporate insolvencies have risen 4.5% from Q4 2016 to Q1 2017 and are 5.3% higher than this time last year.
Adrian Hyde, president of insolvency and restructuring trade body R3, commented on this rise: “Having been flat last year and having fallen slowly from a post-financial crisis peak before that, corporate insolvency numbers are starting to move up again. Low interest rates, creditor forbearance, and a growing economy mean insolvency numbers are still close to record lows but the past year and a bit has been much more challenging for businesses.
“The pound’s fall in value since last year’s referendum will have hurt importers, while many of the currency hedges that protected larger companies in the immediate aftermath of the referendum will have begun to unwind at the start of the year.
“Other challenges include the introduction of the National Living Wage and the rollout of pension auto-enrolment to smaller firms. More obstacles lie in wait, too. The rates changes – despite some last minute alterations – could hurt businesses in London and the South East, for example.”
However, he added that this does necessarily set the trend for the rest of the year. He said: “It’s worth noting, however, that insolvencies usually rise in the first three months of the calendar year as many companies come to the end of their financial year and have to make some difficult decisions. Insolvency numbers should be watched closely over the next year to see whether recent rises are just a blip or the start of a new upwards trend.”
The report showed that personal insolvencies are 15.7% higher than this time last year and have risen 6.7% from Q4 2016 to Q1 2017.
Hyde commented: “Compared to where insolvency numbers were a few years ago, personal insolvency rates are still low and the recent bankruptcy rises have been very small. However, a continued gradual upwards shift may be a sign that the post-recession return of high levels of consumer borrowing and spending is starting to reach its limits.
“The increase in IVA numbers is harder to assess. It may be down to increased insolvencies but it is just as likely to be because IVA providers have made it easier for insolvent individuals to set up an IVA, or because people have been switching from a non-statutory debt management plan to the statutory insolvency regime.
“It should be remembered that the statutory insolvency numbers do not give the full picture of personal insolvency in England & Wales. There are potentially hundreds of thousands of people in non-statutory debt management plans, but unfortunately, there are no official statistics on these. Better information would give us a better understanding of the personal insolvency landscape. A register of debt management plans would be a good step forward.”
Hyde has recently been appointed president of R3 for a year-long term, effective April 21.