The Insolvency Year in Review

The Insolvency Service has reported that insolvency numbers have fallen from their peak in 2010. It is expected that this is a result of the continuing low inflation and growing economy, in addition to the return of real wage growth.

Q4’s number of cases was boosted by the changes to Debt Relief Orders in October; this helped make the insolvency regime much more accessible to those who are in financial trouble. It is important to note that the increase is likely to be due to the accessibility rather than a rise in the number of people having financial difficulties. This increase in accessibility has meant that hundreds of people using non-statutory debt managements plans to deal with their debts have been able to find better, formal processes.

Overall it looks like personal finances are in better shape than they have for a while. R3’s regular survey of 2,000 British adults has found that the proportion of British adults who say they often or sometimes struggle to payday is at a record low at 36%. Whilst two-in-five adults say they are fairly worried about their current level of debt which is down from 2015.

Corporate insolvencies are also continuing to slow and decline since during the recession. The falling price of a barrel of oil has helped businesses to bring costs down. However, it is causing a considerable degree of difficulty for those in the sector. Businesses appear to be enjoying the favourable circumstances with the low interest rates and inflation. It has resulted in reasonable growth in the economy and high levels of liquidity which will have helped buoy businesses along.

The key findings for 2015:

Company insolvencies were at the lowest level since 1989; an estimated 14,629 companies entered into insolvency. This was mainly driven by a 23% decrease in compulsory liquidations and a 4% decrease in creditors’ voluntary liquidations.

Individual insolvencies were at their lowest level since 2005; a total of 79,556 insolvencies. This was a 19% decrease compared to 2014 and the lowest annual total since 2005. The main reason for this is the decrease in individual voluntary arrangements. In the previous two years, IVAs have made up 50% and 53% respectively. 2015 also saw the lowest number of bankruptcies since 1990 and debt relief order decreased to the lowest level since 2009, despite the changes to eligibility.