Moorfields Corporate Recovery comment on the latest Insolvency Statistics Q4 2014

Ben Stanyon, Senior Manager, Moorfields Corporate Recovery Ltd, comments on the latest statistics released by the insolvency service:

The latest set of Insolvency Statistics continues to display a lenient market for debtors, with both personal and corporate insolvencies falling further in 2014.  A prolonged and continued low base rate, coupled with increased lending competition, is providing options for raising or rolling over debt that would otherwise be called in. 

In summary:

• Creditors Voluntary Liquidations (CVL’s) down 9.3% on 2013
• Administrations down 24.3% on 2013
• Receiverships (including company LPAs) were down 21.1% on 2013
• Bankruptcies down 17.3% on 2013
• Individual Voluntary Arrangements (IVA’s) up by 6.8% on 2013

So is this really sign of an economic recovery?

Personal

“ This is the second quarter that we have seen a decline in bankruptcies, and we expect this decrease  to continue as the government plans to raise the minimum amount of debt that individuals can be forced into bankruptcy from £750 to £5000 in  October later this year.”

 “However whilst bankruptcies remain on a downward trend we have seen the number of IVA’s raise by 6.8% as this is seen to be an attractive alternative to bankruptcy.  We expect this trend to continue as the government brings in the new debt levels.”

“Some individuals will have gained the benefit of PPI and similar rebates in the past few years, which will have staved off bankruptcy for many.  These rebates have, totalled c. £15bn according to the Financial Conduct Authority. This sudden influx of cash into the personal market may delay bankruptcies in the short term, however, once this money has been spent it is inevitable that people will seek to find alternative solutions most likely through an IVA. Similarly, with the availability of cheap credit it is likely borrowers will stretch themselves and then as interest rates rise will struggle to repay.

Corporate

“From a corporate perspective, administrations have fallen to their lowest since 2004 which shows the economy is continuing to stabilise. Nevertheless compulsory liquidations have risen slightly which is a sign that businesses are taking action with regards to outstanding debt.”

Unfortunately low interest rates and falling inflation are likely to increase the number of zombie companies, who are benefitting from meeting interest demands as they fall due, but not achieving much more.

In relation to industry sectors we have noticed that many sectors are now showing signs of stability and even growth, but some are showing accelerated levels of distress in particular agriculture, construction and manufacturing where liquidity remains an issue.”

About Moorfields

Moorfields is one of the UK's leading independent firms of restructuring and insolvency specialists. Our highly skilled teams include restructuring professionals and licensed insolvency practitioners who provide leadership, experience and high quality advice to companies and their stakeholders in financially distressed situations

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