Insolvency Oracle

Developments in UK insolvency by Michelle Butler

Peering into the Insolvency Statistics

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Whilst clearing out my e-file, I took a few minutes to review the Insolvency Service’s insolvency statistics up to the end of 2012, released on 1 February 2013: http://www.insolvencydirect.bis.gov.uk/otherinformation/statistics/201302/index.htm. I thought I’d dig a bit deeper into the stats*.

Corporate Insolvencies (England & Wales)

It has always bugged me that the Service produces a Liquidations graph but none for the other corporate procedures, so I thought I’d produce one myself. Unfortunately, whilst I’ve had no trouble embedding photos into my posts, I have failed to do the same with graphs, so I’m afraid you’ll have to click here to see the graphs: Graphs 03-04-13 (I’m probably teaching grandmother to suck eggs, but if you Ctrl-click onto “Graphs 03-04-13”, it will open up a new tab, which will mean that you can easily switch from text to graphs.)

A few notes on the figures of graph (i) (drawn from the Insolvency Service’s published data, linked via the Insolvency Service release referred to above):

• They have not been seasonally adjusted, which I presume explains some of the spikiness of the graph and particularly, I suspect, the more pronounced Q4 troughs and Q1 peaks.
• I have counted three sets of group company insolvencies (844 Adms in Q4 06; 729 Adms in Q4 08; and 129 CVAs in Q2 12) as only one insolvency in each case.
• Recs includes LPA Receiverships and the Insolvency Service noted a difference in their handling of the data during 2007 and thus the figures for 2007 (the most pronounced effect being on the Receivership figures) are not directly comparable.

I wonder if these complications are some of the reasons why the Service has never produced graphs for these insolvency procedures!

A few personal observations and conjectures:

• With the Enterprise Act 2002 introducing a fundamentally-revised Administration process in September 2003, it seems that it took some time for the momentum to build – Administration numbers did not seem to start levelling out until late 2005.
• Alternatively, perhaps it has something to do with the timing of post-Sept 03 debentures and that probably some of these began leading to Administration as the years rolled on (probably not coincidental that Receivership appointments were also falling in this 2003-2005 period).
• I thought the sequence of peaks in the various types of insolvency was interesting: Administrations peaked in Q4 08/Q1 09; Liquidations in Q1/Q2 09 (not included on the above graph); Receiverships in Q3 09; and CVAs in Q2 10. No doubt, commentators of recession and insolvency processes will have their own explanations for this sequence. I have my own ideas also, but as I am coming at it from such a position of ignorance, I wouldn’t dream to putting them in print!

I also looked at the figures for Administrations that moved to CVLs and compared them with the number of Administration appointments for the previous year on the assumption that, generally, if a CVL were the appropriate exit route, the Administration would move to CVL a year after appointment – the spikiness of the resultant graph probably indicates that this is a rubbish assumption! See graph (ii) of Graphs 03-04-13

I am not a statistician – it shows, doesn’t it?! – so all I think this suggests, if anything, is that the percentage of Administrations moving to CVL has held pretty steady throughout the past six years. Is that some positive news, that, despite the apparent diminished value of assets in the recession, it seems that just as many Administrations (by percentage) move to CVL, i.e. have the prospect of returning something to the unsecured creditors?

Personal Insolvencies (England & Wales)

The Insolvency Service releases tend to be very thorough when it comes to personal insolvencies, so there’s not much to add, but their data does include figures for Income Payment Orders (“IPOs”) and Income Payment Agreements (“IPAs”), at which I thought I’d take a look. As bankruptcies are recorded at the date of the order, but IPOs/IPAs occur later, I thought it only fair to look at this on a yearly basis – see graph (iii) of Graphs 03-04-13.

IPOs/IPAs look fairly proportionate to bankruptcies, don’t they? Let’s look at this in a different way – see graph (iv) of Graphs 03-04-13.

I’m not sure what – if anything – this illustrates: does it suggest that a larger proportion of bankrupts can pay something from their income? Or does it demonstrate the success of IPAs, which were introduced in April 2004? Or does it suggest that Official Receivers have become more proactive in pursuing IPO/IPAs?

Another Insolvency Service note I found interesting was: “Prior to December 2010 a proportion of surplus disposable income was allowed to be retained by the bankrupt, post December 2010 all surplus disposable income was claimed by the Official Receiver as trustee. Another change in policy was implemented at the same time in that the minimum payment sought under an IPO/IPA reduced from £50 per month to £20 per month”. Perhaps that explains the 2011 peak, but then what about the 2012 dip? I’ll be interested to see how this graph develops over the next couple of years.

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* All Q4 2012 figures are provisional.

By the way, if you’re wondering about the introduction of images… A friend suggested that I should liven up the posts (I absolutely agree they could do with it!) with photos that have a link – even if extremely tenuous – with the words. I hope it helps the readability!

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