Liquidations during the fourth quarter in England and Wales totalled 3,552 which included 692 compulsory liquidations and 2,860 creditors’ voluntary liquidations (CVL’s). In total, liquidations have decreased by 7.4%, in comparison to the previous quarter. In addition, when compared to the fourth quarter of 2012, liquidations declined by 7.1%.
When comparing the compulsory liquidations to previous quarters a reduction can also be identified. Against the previous quarter, there is a decrease of 26.7% and a decrease of 25.8% when compared to the fourth quarter of 2012. It could be suggested that the decrease in compulsory liquidations is due to the reluctance of banks and creditors to commence the scheme as it is a costly process that many feel does not provide a sufficient material return.
A decline is also noticeable with CVL’s. In comparison to the prior quarter a decrease of 1.1% is apparent as well as a decrease of 1.0% when compared to the fourth quarter of 2012. Due to the last quarter of 2013 having been concluded the total liquidations of 2013 can be compared to the total of 2012. Over the course of the year 2013 there have been a total of 14,982 compulsory liquidations and CVL’s which included 3,624 compulsory liquidations and 11,358 CVL’s. In total the number of liquidations in 2013 has reduced by 7.3% in comparison to 2012. Furthermore, the number of compulsory liquidations in 2013 decreased by 14.9% and CVL’s decreased by 4.5%, both in comparison to 2012.
This perhaps reflects an improvement in the economy however this will need to be sustainable. These statistics will need to continue into the first quarter of 2014 and further in order to be certain that the improvement is stable and likely to continue. The decline, however, reflects the improvement of the insolvency regime and its ability to aid both companies and individuals who are in debt. In addition, in terms of companies, these reductions are a reflection of the rebalancing in the retail sector which is a vast improvement to the position of the high street a year ago.
Additionally, during the fourth quarter of 2013 there were a total of 1,001 other corporate insolvencies. This is the lowest it has been in six years. The total consisted of 236 receiverships, 642 administrations as well as 123 company voluntary arrangements (CVA’s). When these statistics are compared to those of the fourth quarter of 2012 a decrease of 0.6% is apparent. When reviewing the statistics for the whole of 2013, the number of other corporate insolvencies totalled to 3,859. This figure separates into 917 receiverships, 2365 administrations and 577 CVA’s. Again, when compared to the same statistics of 2012 a decline of 16.0% is evident. Many companies in general have received alternative sources of funding. This includes things such as pension funds and these schemes could be a factor that has improved the financial situation of many companies.
Individual insolvencies, which include bankruptcies, debt relief orders (DRO’s) and individual voluntary arrangements (IVA’s), totalled to 24,282 during the fourth quarter of 2013, in England and Wales. This was a 4.6% decrease in comparison to the fourth quarter of 2012. Separately, the number of bankruptcies in the fourth quarter amounted to 5,386 and this was a 22% decline compared to the same quarter of the previous year. The number of DRO’s summed up to 6,563 and this represented a decrease of 13.1% against the fourth quarter of the prior year. This is the lowest it has been since 2005. However, it could be argued that these statistics are due to the fact that the research does not include new Debt Management plans and Payday loans. These schemes are being increasingly used as a resolution for debt despite the realism that they often increase the debt further. Due to the fact that a vast majority of these companies do not register their schemes, research into their numbers would not be representative. Therefore, these statistics are unlikely to represent the true number of individuals in debt as they may be using other forms of debt management.
When comparing the number of IVA’s, totalling to 12,333, against the same quarter of the preceding year a drop of 12.3% is apparent. These statistics identify that IVA’s currently account for 51% of all individual insolvencies. This is thought to be reflective of the increased cost of living. In addition, approval rates for IVA’s have improved as well as a decrease in failed IVA’s.
For the duration of 2013, there were 101,049 individual insolvencies in England and Wales. In comparison to the equivalent statistics of 2012, there was a decline of 7.9%. However, when comparing these statistics to recent decades the numbers are still very high and therefore this needs to be taken into consideration when analysing the decrease.
The amount of bankruptcies in 2013, 24,536 in total, showed a decrease of 22.8% when compared to 2012. DRO’s also decreased, with a reduction of 11.7%, amounting to 27,546 in total. Contrastingly, IVA’s, in 2013, increased by 4.9% when compared to 2012, with a total of 48,967. Significantly, 2013 is the first year that the number of DRO’s amounted to more than the number of bankruptcies. However, 2013 is the third consecutive year that the total of bankruptcies has been lower than the number of IVA’s. It could be suggested that this is due to the general difference in the causes of bankruptcies and IVA’s. Bankruptcies usually arise from events such as mass job loss whereas IVA’s are more likely to have arisen slowly and eventually built up. Therefore, when the increased cost of living outweighs individual’s incomes the debt can slowly increase every month. As a result, this is often suggested to be the reason for the increased amount of IVA’s in relation to the number of bankruptcies. In addition, these facts could be seen to be a result of the introduction of DRO’s in 2009 which have statistically impacted the number of bankruptcies.
