In Q2, we saw rising levels of corporate insolvencies following many one-off liquidations of personal service companies plus a decline in registered individual insolvencies despite the recent upward trend. Fast forward three months and we’ve seen a bit of a reversal in places, proving how hard it is to properly forecast insolvency activity in the UK at this time.
The upward trend of individuals entering an insolvency process had been fairly consistent up until Q2 and it would seem that it was merely a blip on the graph as last quarter we saw IVAs at record high levels. 15,523 were in fact recorded making it the largest quarterly number of IVAs since they were introduced in 1987. Although never good to see these type figures, it is certainly a strong indicator that people are taking a positive and pro-active approach to managing their financial situation.
Total company insolvencies decreased by 12.5% in Q3 compared to the previous quarter but the underlying number of corporates that went insolvent was actually up on Q2 by 15.0%, once you exclude the PSC liquation figures. Looking through the numbers, this seems to have been driven by a rise in CVLs; up by 22.2% compared to Q2 figures and 21.2% higher than in Q3 2016.
The Construction sector has continued to be one of the main UK industries to suffer financially in recent years and 2,616 new company insolvencies took place in the sector over the 12 months ending Q2 2017. As mentioned previously, one-off PSCs certainly skewed the figures between April to June and this meant that the highest number of corporate insolvencies was in fact with Administrative & Support Service companies. Combined with the numbers recorded within Wholesale & Retail Trade, these three sectors accounted for 50% of all the corporate businesses that entered an insolvency process in Q2. These figures are often recorded with a one quarter lag but it is unlikely for there to have been much of a change across Q3 when reviewing the industries most at risk of insolvency.
Q4 insolvency figures will be released towards the end of January 2018 and by then we will have had the rise in interest rates. We know that there are many UK households just about managing their income and that there are several companies’ across multiple sectors hanging on month to month with varying debt levels and so even with a small change to the base rate, we are likely to see higher corporate and personal insolvencies from now until the end of the year.