The Insolvency Statistics for the first quarter of 2011 (to 31 March 2011) were released by the Insolvency Service on 6 May 2011. The press release can be found on our website here or alternatively, the full details can be found here.
The most common form of corporate insolvency is liquidation - either compulsory through the Court or voluntary through the directors/shareholders. Overall, liquidations are up by 3.7% on 2010 Q4 and by 2.1% on 2010 Q1. Not surprising given that this is what you would expect to happen when an economy starts to come out of a recession. Total liquidations for 2011 Q1 are 4,121 (2010 Q1: 4,036).
What you don't see is that there was a reduction of 17% for complusory liqudations compared to 2010 Q1 and an increase of 11% for voluntary liquidations compared to 2010 Q1. The numbers are greater for voluntary liquidations hence the overall increase. In my view, there's a simple explanation for this - most compulsory liquidations are as a result of winding-up petitions presented by HMRC. With the continuing Time To Pay ("TTP") scheme, even though it's getting harder to agree a TTP, there has been a general decline in such petitions.
On a practical basis this means that more directors are putting their companies into voluntary liquidation, rather than waiting for a creditor (such as HMRC) to do it through the Court. It's not clear from the detailed statistics, but it would suggest to me that with HMRC tightening up on TTP schemes, the increase in voluntary liquidations may well be as a result of this.
Based on the first quarter's figures, liquidations overall in 2011 may well reach 16,500 companies. This compares with the total for 2010 of 16,045, a potential increase for 2011 of nearly 3%. (The highest recorded in the last 10 years was 2009: 19,077 and the lowest was 2003: 12,184.)
On administrations (the formal insolvency process that may sometimes give rise to the infamous "pre-pack"!), these remain almost exactly the same comparing 2010 Q1 (783 admins) and 2011 Q1 (782 admins). However 2010 Q4 to 2011 Q1 shows an increase of 22% (140 additional companies). Not really surprising given the dreadful weather over Winter 2010 and the lack of retail spending over Christmas 2010. Hopefully that's a seasonal blip...
On individual insolvencies, this looks better: there has been an overall reduction of 15% comparing 2011 Q1 with 2010 Q1. This still equates to 30,162 individual insolvencies in the first 3 months of 2011. This includes bankruptcies (-31%), Individual Voluntary Arrangements (-8%) and Debt Relief Orders (+20%). The increase of 20% in DRO's is nothing to worry about as these are just "non-asset, low debt" bankruptcies in another form. We're still looking at reduction to potentially 120,600 individual insolvencies in 2011 compared to 135,045 in 2010.
However, I suspect that the fallout from the spending cuts hasn't worked its way through yet. Job cuts inevitably lead to finacial difficulties for individuals but those difficulties may not result in a formal insolvency until 12 months or more after the fact. I further suspect that 2011 will be less than 2010 for individual insolvencies, but 2012 will see an increase, possibly with a higher total than 2010.
You can obviously interpret statistics in all sorts of ways! My overall impression however is that corporate insolvencies are up slightly and individual insolvencies are down slightly compared to last year. However, the upward corporate trend from 2010 Q4 is quite high (3.7% liuqidations and 22% administrations) so it will bear watching for the next statitics, due out in early August 2011.
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