Baker Tilly in Yorkshire responds to latest insolvency figures

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, Adrian Allen, head of Baker Tilly’s Restructuring and Recovery practice in Yorkshire, said: “The Yorkshire region has a higher than average personal insolvency rate, so this continued decline in the number of people becoming insolvent is welcome.

“There could be a number of reasons behind this decline – 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 per cent 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 Debt Relief Order or bankruptcy.

“But as the overall numbers decline, we are now seeing IVAs catching up with the other insolvency procedures.

‘The decline in corporate failures is also welcome, but there are underlying problems which could lead to a rise in corporate insolvencies in the next one to two years.

“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 accept 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.”

Adrian Allen
Adrian Allen

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