Official statistics for 2015 have shown a continued decrease in the number of people and companies going bust. Company insolvency has fallen to its lowest level since 1989 whilst the number of people becoming insolvent is at the lowest level for 10 years.
During 2015 there were 14,629 company insolvencies overall, a reduction of 10% compared to 2014. The number of individuals who used a formal insolvency procedure to deal with their debts during 2015 was 79,968, which was a 19% drop in comparison to the previous year.
I am sure that the dramatic fall in the number of insolvencies is a clear sign that the economy is bouncing back from the financial doldrums that followed the last recession. I have seen that wages are starting to increase at least in line with the rate of inflation, reversing a trend of decreasing household incomes for many years. At the same time, companies are seeing a resurgence in optimism and are being boosted by continued low interest rates and increased demand for goods and services.
Whilst the overall numbers are clearly good news for the economy, it is interesting to drill into the figures to see which types of insolvency are being used more than others: this can give an insight into what it happening in the real world.
For companies, the number of compulsory liquidations, where the Court orders that a company is wound up, has fallen by nearly one quarter in the past 12 months to 2,874. In comparison, the number of ‘voluntary’ liquidations, where the directors decide that a company needs to be closed, fell by just 4%, to just under 10,000. This suggests that there are still many companies that are struggling with historic debt or where there are major underlying problems that simply cannot be sorted out. Businesses get into difficulties for all sorts of reasons, and at all stages of the economic cycle, so it is not surprising that many thousands of companies are being wound up even though the economy is ‘on the up’.
So whilst the overall picture is rosy, spare a thought for those who are not yet sharing in the economic upturn.
The good news is, we can help to sort out those financial headaches. For a friendly chat about how we can help, call Paul Moorhead today on 01709 331300.