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Monday, 7 February 2011

Insolvency Statistics Show Modest Rise in use of CVA's

The insolvency statistics have hit the headlines recently as they have shown an increase in the number of personal insolvencies. However, the number of corporate insolvencies have actually fallen in England and Wales.

There were 4,905 receiverships, administrations, or company voluntary arrangements last year. That was 23% fewer than in 2009, which was a record year for company insolvencies.

The number of firms that were liquidated - also fell, by 16% to 16,045.

The total number of company voluntary arrangements has risen modestly in 2010 to 765 compared to 726 in 2009. This reflects the increasing popularity of the CVA as a rescue option where the company facing insolvency has been able to continue to trade. We are pleased to see this growth but fail to understand why more companies do not use the powerful rescue technique.
Scotland has seen the opposite effect where the number of company liquidations has increased by 50% whereas the number of personal insolvencies has fallen by 20% when comparing Q4 2010 to Q4 2009. According to the Accountant in Bankruptcy the Scottish have been better at seeking advice early.

Other areas that have seen a large fall in the number of administrations are as follows;

Midlands down 30%
London and South East down 37%

These figures compare 2010 to 2009 which was a record year for administrations. We believe the tightening of the rules on pre-pack administrations has cut the use of pre pack when it was the fastest growing insolvency method in 2009. Using Statement of Insolvency Practice 16 the insolvency regulators have set out a regime that ensures the system is not abused.

At the moment the economy is in stagnation and the outlook for the rest of 2011 is unclear. Further spending cuts, increases in taxation and even small rises in interest rates could make life more difficult for struggling businesses. Many insolvency firms seem to expect a rise in the number of corporate insolvencies, we are hoping for a rise in the use of CVA’s!

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