Baker Tilly in the South responds to latest personal insolvency figures

By Anita Jaynes on May 7, 2015

The latest statistics released by the Insolvency Service show that individual insolvencies in England and Wales have reached their lowest levels since the end of 2005 and company insolvencies are at their lowest level since the fourth quarter of 2007.

Commenting on the latest figures, Nigel Fox, Insolvency Partner at Baker Tilly’s Southampton office said:“This continued decline in personal insolvencies could be due to a number of reasons – more responsible lending, willingness from creditors to accept unofficial payment plans, low interest rates and less spending in general.

“The key drop we are seeing this quarter is in Individual Voluntary Arrangements (IVAs), which have dropped by 13.1% since the last quarter of 2014. Over the last decade, we have seen a steady decline in overall personal insolvency levels with Debt Relief Orders (DROs) and Bankruptcy numbers dropping first. Numbers of IVA’s are the last to drop because people have been feeling confident enough about their financial prospects to commit to a five year repayment plan, rather than opting to walk away from their debts by entering into a DRO or bankruptcy. But as the overall numbers decline, we are now seeing IVA’s catching up with the other insolvency procedures.

“With corporate insolvencies we have seen a trend for the banks to sell off their non-core bad debt books to private equity groups. As these groups work through those debt books, they are prioritising those firms that they can realise assets from first, which is why we are seeing the numbers of insolvencies decline. However, as they start to focus on the more distressed companies in the portfolios, they may then be left with little choice but to enter them into some kind of insolvency procedure.

“These statistics show real signs that we are starting to work our way through the problems of the credit crunch. However, because of this renewed confidence people and creditors have in the country’s financial health, new lending is now starting to rise. If we see a rise in interest rates and inflationary pressures beginning to emerge, this could leave many in a vulnerable position.”