The latest insolvency statistics for January to March 2015 reveal the total number of company insolvencies is at its lowest level since Q4 2007.
Findings from the Insolvency Service show liquidations (CVLs and compulsory) were down by 8.6% since the same time last year, while administrations had fallen 16.9%. Company Voluntary Arrangements (CVAs) were down by 34.5% since the same time last year, the lowest since Q4 2007.
Findings further show there were 2,481 CVLs in the first quarter of 2015, a 5.6% drop since the same period last year, where there were 2,649 liquidations. There was a drop of 3.7% from the previous quarter (Q4 2014).
The graph below from Companies House and The Insolvency Service shows the downward trend since the peak of the recession in 2009.
Why the gradual decline?
Despite recent ONS data showing economic growth is slowing down in the first quarter, the national economy is still in a strong position. With the alternative finance industry booming, many small and medium sized businesses, including start-ups, have access to much-needed funding and equity.
The falling number of insolvencies indicates fewer businesses need to go through formal channels of restructuring and turnaround, especially if debt finance and suitable backing is easier to secure. Many companies have most likely avoided CVAs, administrations and liquidations because of this.
It is possible that some distressed companies have been able to borrow money to pay their creditors, and so deferring any potential action. Businesses could be buying time to take full advantage of improving market conditions.
It will be interesting to see what the rest of 2015 brings, especially after the election.