R3 comments on Q1 personal and corporate insolvency statistics
Personal Insolvency levels fall
“Personal insolvency continued to fall in the first quarter of 2013, surprisingly given pressures on household budgets, with a 12.9% decrease on the same period for a year ago. Overall personal insolvency levels are now back down to where they were in 2008.
“This is to be welcomed, but conceals a group outside formal insolvency procedures who have flagged up concerns over debt pressures. According to research by R3, half of those with debt concerns now blame rising costs of living above traditional reasons such as job loss or the end of a relationship for pushing them into debt. These pressures are unlikely to dissipate soon.
“Analysing the figures, while bankruptcies and Debt Relief Orders (DROs) continued to fall, Individual Voluntary Arrangements (IVAs) have increased over the first quarter of 2013. Perhaps some are being prevented from accessing other formal insolvency procedures due to the barriers to entry – the up-front fee (£700) in the case of bankruptcy and the asset and debt thresholds for DROs. We would strongly encourage Government to consider payment of the bankruptcy fee by instalments and to re-examine thresholds for entry into DROs. This would ensure that individuals struggling with debt are able to access the debt relief solution most suitable for them.
“Perhaps there are signs of optimism on the horizon longer-term. More think their financial situation will improve (21% of respondents) than worsen (18%) in the next six months, according to R3. While pressures remain on the cost of living, optimism is good, but keeping an eye on the realities of day to day budgeting would still be well advised.”
Decreasing levels of corporate insolvency
“Today’s drop in corporate insolvency could signal that pressure on businesses may be starting to ease, supported by R3’s research recording fewer distress signs from business owners. The total number of Company Liquidations in the first quarter of 2013 has fallen 5.3% from the previous quarter and 15.8% year on year. Administrations are also down 28.5% year on year.
“R3’s research also indicates that the number of businesses reporting distress declined significantly this quarter from 54% in November 2012, to 40% in April 2013. However, growth remains hesitant and businesses are still facing significant issues. According to R3’s latest research 53% of businesses reported no signs of growth (for example increased sales or profits).
“Nearly a third (32%) of businesses report that the biggest problem they currently face is the rising cost of fuel and utilities, followed by reduced consumer spend (26%). Concerns over utility bills as well as revenue show that businesses are being squeezed on both sides.
“While things may not be getting worse, there are still challenges to overcome.”
Giles Frampton, R3 Vice-President
For further information please contact:
Will Black, R3 Communications Manager
t: 020 7566 4215 m: 07917 422 485 e: firstname.lastname@example.org
Notes to editors:
Insolvency Service statistics here
– R3 is the trade body for Insolvency Professionals, and is made up of 97% of the UK’s Insolvency Practitioners.
– R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by one of nine recognised professional bodies.
– R3 stands for ‘Rescue, Recovery, and Renewal’ and is also known as the Association of Business Recovery Professionals. Website www.r3.org.uk