The latest insolvency statistics released today by the Insolvency Service show that Liquidations as a whole in the third quarter of the year have fallen to their lowest level since the beginning of 2008, although there was a very slight increase in the level of Creditors Voluntary Liquidations (CVL) from the previous quarter.
In the 12 months ending September 2014; 1 in 186 companies went into liquidation down from 1 in 117 in the 12 months ending July 2014.
Company Voluntary Arrangements (CVA) and Administrations continue to be broadly stable showing slight increases on the previous quarter but still lower that the same period in 2013.
Gary Birchall, Insolvency Practitioner at Focus Insolvency Group, commented,
“The recent economic environment has helped to stabilise and reduce corporate insolvency figures across the board. Struggling businesses have survived due to the low interest rates and more favourable trading conditions.
Instances of zombie companies, those only able to pay the interest on their debts, are also on the decline. However businesses should take care not to overtrade in their eagerness to replicate pre-recession successes. A cycle of overtrading can be as difficult to escape as a debt burden, creating significant pressure on cash flow and increasing the risk of business failure.”
Bankruptcies continue to decrease hitting their lowest level in 15 years while Individual Voluntary Arrangements (IVA) fell by 1.9% on the same quarter last year after increasing year on year in the previous five quarters.
Debt Relief orders (DRO) saw an increase of 2.7 on the same period in 2013 but remain largely similar on numbers for the year to date compared with 2013.
The rate of personal insolvency as a whole in the 12 months ending September 2014 decreased with an average of 1 in 446 adults becoming insolvent compared to 1 in 440 people in the 12 months ending July 2014.
Gary Birchall went on to comment,
“Again we have seen the benefits for those wishing to reduce their debt due to record low interest rates. It has enable people to avoid drastic and life changing options such as bankruptcy and take advantage of important debt relief tools like IVAs.
The popularity of the IVA has spiked during this year and show that consumers are willing and confident about becoming debt free. The popularity of the DRO has also increased for those whose debts fall under £15,000 although it would be nice to see this level increased to the benefit of even more individuals that cannot access bankruptcy.
However low interest rates have succeeded in creating a new breed of borrower, one that has never experienced a rate rise. As demand for credit and personal loans increases it has raised concerns for future affordability. When the record low rate inevitably comes to an end many may find themselves with debts they can no longer afford.”