Insolvency Index: capital and Wales enjoy largest decreases as key sectors show recovery
By Tim Wood and Henry Kirby | 30 October 2015
“Despite a turbulent few months for the global economy… the UK has continued to fare relatively well” – Clive Lewis, head of enterprise, ICAEW
London and Wales showed large falls in company failures as insolvencies across the UK dropped year on year for the third quarter in a row.
The Exaro Insolvency Index reveals that London enjoyed the largest fall, as the number of companies that filed one or more insolvency notices dropped in the three months to September by 22.2 per cent compared to the same period in 2014, decreasing from 1,742 to 1,355.
Wales saw a drop of 19.8 per cent, going from 162 in the third quarter of 2014 to 130 in the same three months this year.
This compares with an equivalent fall for the whole of the UK from 6,855 to 6,069 – a fall of 11.5 per cent. This marks a continuing deceleration in the number of insolvencies this year, after the second quarter figures fell by 6.6 per cent from 6,841 to 6,390. Insolvencies fell five per cent in the third quarter compared to the second.
Clive Lewis, head of enterprise at the Institute of Chartered Accountants in England and Wales (ICAEW), said: “The continued drop in insolvencies is another nod to the economic recovery.”
However, official figures for the UK’s gross domestic product yesterday showed a deceleration in growth in the third quarter compared to the previous three months, falling from 0.7 per cent to 0.5 per cent. Nonetheless, the GDP figures for the latest quarter also showed a year-on-year growth of 2.3 per cent.
Other figures released yesterday by the Insolvency Service showed a year-on-year fall in personal insolvencies by 18.5 per cent for the third quarter, to 19,683 people. However, this was up by 2.8 per cent on the previous three months.
Lewis said: “Despite a turbulent few months for the global economy, and slowing growth according to this week’s GDP figures, the UK has continued to fare relatively well. We expect the UK to remain one of the fastest-growing developed economies in this year and next.
“However there are alarm bells for businesses on the horizon. Policy will have an impact with the increase in the living wage, apprenticeship levy, and insurance premium tax hikes all impacting on business.
“London continues to be the world’s centre for business with its strong record of business survival this quarter. We are also pleased to see a drop in insolvencies in Wales.”
Mike Jervis, partner in restructuring and insolvency at PwC, the professional-services partnership, said: “Formal insolvencies will continue to fall for two main reasons. Since the recession, management teams are much better at spotting the warning signs of trouble. They have learnt their lesson and the tightening of credit has made many companies much better at forecasting their financial requirements.
“There are also other options available today outside the formal insolvency route, such as debt-equity swops and voluntary arrangements, which will continue to keep the numbers down.”
On London’s strong performance, he said: “If you look at the industries that are in trouble at the moment – steel, oil, gas and heavy industry – these tend to operate outside the south east, so it is not unexpected that the capital is seeing a reduction in insolvencies.”
The top graph to the right, which can be clicked to enlarge, shows falls in all types of insolvencies across the UK: administrations and receiverships, winding-up petitions, orders or resolutions to wind up, and appointments of liquidators.
The other two graphs show the equivalent figures for London and Wales. Only one category, winding-up petitions in Wales, did not see a year-on-year fall. The number remained exactly the same at 41.
The Exaro Insolvency Index, the most comprehensive survey of its kind in the UK, also shows year-on-year falls in insolvencies in the third quarter in some key sectors: real estate, down by 15.2 per cent; retail outlets, 14.4 per cent; manufacturing, 13.8 per cent.
Insolvencies among information and communication companies fell slightly year on year, by 1.3 per cent, although this masks sharp increases among software developers and IT consultancies, which rose 27.1 per cent and 12.9 per cent respectively.
Overall, the latest insolvency figures suggest a continuing recovery in the UK that has strengthened even further since the previous set of data from the Exaro Insolvency Index in July.
The Exaro Insolvency Index is based on insolvency notices in the London, Belfast and Edinburgh Gazettes, combined with information from Companies House. A small proportion of the insolvencies is not ascribed to a specific sector in the source data.