Upward trend for insolvencies

The third quarter of 2017 saw a rise in corporate and personal insolvencies showing a marked change in direction from what has previously been a generally downward direction in levels for some time.

Insolvency Service statistics show that corporate insolvencies rose by 15% compared to the previous quarter and by a similar amount compared to the same quarter in 2016. This has largely been driven by an increase in creditors’ voluntary liquidations. Individual insolvencies were nearly 11% higher than the previous quarter and nearly 8% higher than the same quarter in the previous year. Individual Voluntary Arrangements (IVAs) rose by over 18% which represented the largest quarterly number of IVAs since their introduction in 1987.

The statistics, followed by the interest rate rise in early November 2017, indicates a challenging landscape for business and individuals struggling with debt. Our trade body R3 has undertaken research which suggests that some businesses will struggle to cope with even a small increase in the interest rate.

Personal debt has been very much in the news in recent months with concerns being expressed at the high levels of consumer debt currently in the UK, especially among the younger generation. It is however encouraging to see that the government is looking at the area of personal debt and in November 2017 issued a call for evidence on whether a breathing space regime and improvements to access debt advice would help.

In 2016 the government also consulted on potential corporate insolvency reforms to boost the company rescue options. However, it remains to be seen how quickly the government is able to take reforms forward with parliamentary time being tied up with Brexit concerns.

The trends reflect our current experience and we have seen a particular rise in corporate insolvencies and enquiries in recent months. The key for businesses or individuals struggling with debt is to seek professional advice quickly as this means that there are more likely to be a broader range of options available.

Our focus is always on finding the most appropriate solution for businesses and options can include financing, providing an independent review of the business or sale or turnaround options. We can also provide guidance to solvent business in achieving an orderly wind down of their businesses and are able to provide wider firm specialties such as taxation advice which are often of significant importance in those scenarios. We also advise individuals on trading and personal debt. The important point is to do what is right for that business in a clear and practical way.

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