On 27 January 2017, The Insolvency Service released statistics of the number of corporate and personal insolvencies in Q4 2016. Despite the majority of Insolvency Professionals voicing their concerns over the impact Brexit would have on insolvency numbers, the number of corporate insolvencies remained broadly flat. However, the number of personal insolvencies saw a marked increase on 2015’s figures.

Personal Insolvency

The number of individuals declaring insolvency due to their unmanageable debts was 13% higher in 2016 compared to the previous year. A total of 90,930 people in England and Wales have declared that they were insolvent in 2016, which equates to 1 in 506 adults (0.20% of the adult population).

Although the numbers are rising, the number of personal insolvencies still remain below the peak levels of insolvencies reached in 2010.

Sarah Albon, who is the Chief Executive of the Insolvency Service, commented:

“Personal insolvencies increased last year for the first time since 2010, however the total was still the second lowest number in the last 11 years. It is very distressing to live with unsustainable personal debt so it is important for people to seek advice.”

There were 49,745 Individual Voluntary Arrangements (IVAs) in 2016; IVAs rose by 23.2% in 2016 to return to the levels seen from 2009 to 2014.

Scotland, which has a separate legal system for insolvency, saw its first rise in personal insolvency numbers since 2009. Personal insolvencies rose by 7.9% in the final three months of the year compared with the previous quarter.

Corporate Insolvency

An estimated total of 16,502 companies entered insolvency in 2016, a rise of 12.6% on the year before.

However, the increased figures are apparently attributable to the closure of a claimable expenses tax loophole, meaning that 1,796 connected Personal Service Companies were no longer viable businesses.

Andrew Tate, president of insolvency and restructuring trade body R3, explained away the slight increase of insolvencies in 2016:

“The corporate insolvency numbers have been skewed by a wave of personal service companies being closed in the last quarter. It may have been just the closure of a handful of companies run by an umbrella provider which led to the spike. When you look beyond that though, 2016 had more or less the same number of insolvencies as last year.”

If the Personal Service Companies are excluded from 2016’s statistics, 14,706 companies entered insolvency in 2016, which is only a rise of 0.3% on 2015. This was driven by a 1.1% rise in the underlying number of Creditors’ Voluntary Liquidations (CVLs) and a 0.7% rise in compulsory liquidations.

Focus Insolvency’s Group Development Director, Andy Platt, comments

“Unlike the image created by the Insolvency Service statistics, we saw a much larger rise in corporate instructions during 2016, particularly during the final quarter. This has continued into the New Year, with January 2017 being one of the busiest months we have experienced.

The number of individuals we assisted with IVAs also increased at much higher rate than the apparent national average. Since November 2016, we have engaged five new members of staff to join our IVA team to manage our increasing caseload. We understand how overwhelming the weight of debt on a person’s shoulders can be, so whether a person has corporate or personal debt issues, we would urge them to seek professional advice as soon as possible.”

If you have a client who is experiencing financial difficulties, or if you would like to discuss anything that has caught your eye in this blog post, please get in touch! Focus Insolvency Group specialise in recovery solutions and are keen to help individuals and businesses get back on their feet. We can help with debt consolidation and preventing bailiff action, allowing individuals to make a fresh start and companies to continue to trade.