In the same month that Theresa May triggered Article 50 to commence the UK’s exit from Europe, the Insolvency Service were busy finalising their quarterly statistics for corporate and personal insolvencies in the UK and last week the results were published to the public.
The headline message in the report was that the number of individuals entering insolvency in England & Wales for Q1 of this year was at the highest level since mid-2014. There were 4,539 recorded Individual Voluntary Arrangements, a significant 15.7% higher than Q1 2016 while bankruptcies were also up; 1.3% on the quarter and by 3.7% on the year before.
Although there is now easier access to IVAs and the introduction of an online application process for bankruptcies from April last year, the rise is fairly telling in that despite record low borrowing rates, households are still struggling to deal with the fact that wage growth is not keeping up with the rise in inflation.
As for corporate insolvency figures, there were 357 recorded administrations (13% higher than the same period in 2016) and an estimated 81 CVAs yet the key finding from the report was that the overall level of company insolvencies in 2017 had decreased compared with the unusually high levels seen at the end of last year. However, if you exclude the connected companies that entered insolvency procedures in Q4 2016 then corporate numbers were actually up by 4.5% with CVLs making up 68% of all insolvencies.
This rise in corporate figures from the record lows seen just over 12 months ago indicates that despite the low interest rates and a growing economy, many businesses are still finding it difficult to stay afloat. The fall in the value of the pound will not have helped many import businesses and a large proportion of SME’s will have found the pension auto-enrolment contributions rather challenging.
It was only a few months ago when the Government announced a rise in business tax and NI contributions for the self-employed only to then announce a shocking U-turn at the last budget. Yet the question now being asked by many cash-strapped individuals and businesses is whether this is now a policy that the Government will stick to for the foreseeable future with a general election only a few weeks away.