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29/07/2014

2014 Q2 Insolvency Statistics – R3 comments

Commenting on the April-June insolvency statistics, R3 vice-president Phillip Sykes says:

Corporate Insolvencies

“While administrations and voluntary arrangements have remained at a pretty constant level for the past five or so years, liquidations have fallen gradually since the recession. Although there has been the occasional quarterly jump, things have always fallen back again the next quarter.”

“Other than an improving economy, not much has changed to have a big impact on insolvency numbers. Some sectors, like the legal sector have encountered regulatory challenges, which has led to higher insolvency numbers there, but for everyone else the past few years have been the same story: low interests rates and lenient lenders.”

“An interest rise could cause some businesses extra problems, but it would have to be more than a couple of quarters of a percentage point to make any real difference.”

Personal Insolvencies

“Personal insolvencies fell sharply immediately after the recession but the dip has really bottomed out over the last year or so. Over the past year or two, personal insolvency numbers have pretty much held steady, but things are really beginning to creep up, especially with Individual Voluntary Arrangements.”

“Individual Voluntary Arrangements [IVA] are now at a record high. IVAs have become much easier to access recently. Our members have seen IVAs set up for as low value debts as a few thousand pounds and with surplus incomes* well under £200. These IVAs wouldn’t have been considered a few years ago and people might have used debt management plans or informal arrangements instead.”

“It’s surprising to see Debt Relief Order numbers have remained level while IVAs have risen. Some people in IVAs would be better suited in a Debt Relief Order [DRO], but unfortunately the conditions of entry to DROs are too restrictive. Only people with fewer than £300 in assets and £15,000 in debts can enter a DRO – these levels were suggested in 2005. Inflation and the changing nature of personal debt mean these figures are now outdated.”

“The first half of the year can be a busy time for insolvencies thanks to a combination of people putting off dealing with problems until after Christmas and the post-Christmas bills landing on the doormat in January, February, or March.”

 

 

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see www.r3.org.uk for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.