Reference  INS/COM/147
Date  4 February 2011

STATISTICS RELEASE: INSOLVENCIES IN THE FOURTH QUARTER 2010

Statistics showing insolvencies in the fourth quarter of 2010 are published today (4 February) by the Insolvency Service.

Click here to view the detailed tables from 2001

COMPANY INSOLVENCIES

There were 3,955 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales in the fourth quarter of 2010 (on a seasonally adjusted basis).  This was a decrease of 0.2% on the previous quarter and a decrease of 11.3% on the same period a year ago. 

This was made up of 1,200 compulsory liquidations (which are up 5.8% on the previous quarter but down 9.9% on the corresponding quarter of the previous year), and 2,755 creditors’ voluntary liquidations (which are down 2.6% on the previous quarter but down 11.8% on the corresponding quarter of the previous year). 

Additionally, there were 1,114 other corporate insolvencies in the fourth quarter of 2010 (not seasonally adjusted) comprising 302 receiverships, 642 administrations and 170 company voluntary arrangements. In total these represented a decrease of 24.0% on the same period a year ago.  Within this, administrations were down 24.4%. 

Note: The figures in Table II are not seasonally adjusted and are not, therefore, on the same basis as the headline figures in Table I.  The accompanying detailed tables also include the non-seasonally adjusted series for corporate liquidations.

INDIVIDUAL INSOLVENCIES (not seasonally adjusted - see ‘Notes to Editors’ paragraph 13)

There were 30,729 individual insolvencies in England and Wales in the fourth quarter of 2010. This was a decrease of 13.6% on the same period a year ago.

This was made up of 12,049 bankruptcies (which were down 29.2% on the corresponding quarter of the previous year), 12,508 Individual Voluntary Arrangements (IVAs), (which were down 5.4% on the corresponding quarter of the previous year) and 6,172 Debt Relief Orders (DROs), (which were up 15.4% on the corresponding quarter of the previous year) (see ‘Notes to Editors’ paragraph 12).

In the fourth quarter of 2010, 85.4% of bankruptcies were made on the petition of the debtor, broadly comparable to the levels for recent quarters.  The percentage of bankruptcy orders involving trading debts (self-employed bankruptcies) was 11.9% in the third quarter of 2010 (fourth quarter 2010 figures for trading-related bankruptcies are not yet available), a little lower than the levels seen throughout 2009 and the first half of 2010. 

STATISTICS RELEASE: 2010 SUMMARY, ENGLAND AND WALES

COMPANY INSOLVENCIES

There were 16,045 compulsory liquidations and creditors’ voluntary liquidations in total in 2010 – a decrease of 15.9% on 2009.

This was made up of 4,792 compulsory liquidations (which are down 15.1% on 2009), and 11,253 creditors’ voluntary liquidations (which are down 16.2% on 2009).

Figure 3 shows trends in company liquidations since 1984. 

In 2010 there were also 4,909 other corporate insolvencies, comprising 1,309 receiverships, 2,835 administrations and 765 company voluntary arrangements.  In total these represented a decrease of 22.8% on 2009.

INDIVIDUAL INSOLVENCIES

There were 135,089 individual insolvencies in England and Wales in 2010, an increase of 0.7% from 2009.  This included 59,194 bankruptcies (which were down 20.7% on 2009), 50,716 Individual Voluntary Arrangements (IVAs), (which were up 6.5% on 2009) and 25,179 Debt Relief Orders (DROs).

The Debt Relief Order is an individual insolvency procedure which came into force on 6 April 2009 and which provides an alternative route into personal insolvency for certain categories of over-indebted individuals, subject to some restrictions. Additional details are provided under the “Notes to Editors”, paragraph 12 and on the Insolvency Service website. Some of those who had a DRO approved would have been declared bankrupt had the DRO route not been an option, but it is not possible to quantify this proportion.

Figure 4 shows how the numbers of insolvencies have changed since 1987 (when the first IVAs were registered). 

In 2010, 85.6% of bankruptcies were made on the petition of the debtor, comparable to the level in 2009.  For bankruptcy orders there has been a pronounced shift towards debtor’s petition bankruptcies and away from creditor’s petitions in recent years.

COMPANY LIQUIDATION AND INDIVIDUAL INSOLVENCY RATES: LONGER-TERM PERSPECTIVE

In the twelve months ending Q4 2010, approximately 1 in 138 active companies (or 0.7% of all active registered companies) went into liquidation, which is a slight decrease from the previous quarter, when this figure stood at 1 in 133.  As Figure 3 shows, the liquidation rate remains low compared to a peak of 2.6% in 1993, and the average of 1.3% seen over the last 25 years.  It should be noted that the number of active companies has changed considerably over this period; there were 2.3 million active registered companies in Q4 2010; this compares with only about 900,000 in the early 1990s and less than 800,000 in 1986.

In the twelve months ending Q4 2010, approximately 1 in 323 people became insolvent.  This is down from 1 in 311 in the previous quarter.  As Figure 5 shows, the individual insolvency rate has displayed a steeply upward path (with some fluctuations) since 2004 and is currently elevated compared to the annual average of 1 in 1800 (0.1%) people seen over the last 25 years.

INSOLVENCIES IN SCOTLAND AND NORTHERN IRELAND

The following tables present recent trends in insolvencies in Scotland and Northern Ireland, complementing those for England and Wales above (longer series back to 2001 are presented in the accompanying detailed tables). 

Notes to Editors

1. The official Insolvency Statistics are the most comprehensive record of the number of corporate and individual insolvencies in England and Wales. Insolvencies in Scotland and Northern Ireland are also included, but are shown separately as they are covered by separate legislation, there are some differences in definition, and policy responsibility for them lies within the devolved administrations.

2. The statistics for England and Wales are derived from administrative records of the department for Business, Innovation and Skills (BIS)’ Insolvency Service and Companies House Executive Agencies. For Scotland, the company insolvency statistics are derived from administrative records at Companies House. Figures for individual insolvencies in Scotland are sourced from the Office of the Accountant in Bankruptcy (AiB). The Northern Ireland statistics are derived from administrative records of the DETI Insolvency Service and Companies House.  Generally speaking, numbers of cases are based on the date the insolvency procedure was registered on the administrative recording system, not on the date of the order or agreement.

3. Numbers of insolvencies are not directly comparable with official estimates of business stock, formations or closures. Statistics of business start-ups and closures that are directly comparable with each other have been assembled from VAT and PAYE registered unit records and are published by the Office for National Statistics (ONS) in the ‘Business Demography’ report. The latest figures are those for 2009, and were issued in an ONS statistics bulletin on 1 December 2010. More detailed figures are available via the on-line database NOMIS. Additionally, the ‘Small and Medium Enterprise statistics (SME) for the UK and regions’ report, published by BIS, estimates the total number of businesses in the United Kingdom at the start of 2009 at 4.8 million.

4. The X12ARIMA program (developed by the US Census Bureau) is used for the seasonal adjustment of the insolvency statistics for England and Wales, this being the recommended program within UK National Statistics.  Seasonal adjustment is a process by which changes that are due to seasonal or other calendar influences are removed to produce a clearer picture of the underlying behaviour of the data series.  The data series covering Scotland and Northern Ireland do not demonstrate consistent seasonality and only the raw (unadjusted) series are presented. 

5. Insolvent companies entering liquidation in England & Wales and Scotland are dealt with under the Insolvency Act of 1986 and, in Northern Ireland, by the Insolvency (Northern Ireland) Order 1989. They can either be the subject of a compulsory liquidation (winding-up) order obtained from the court by a creditor, shareholder or director or themselves pass a resolution, subject to the approval of a creditors' meeting that the company be wound up voluntarily (creditors voluntary liquidations, registered at Companies House/Companies Registry). In either case they are said to have been wound-up, and numbers are given in Tables 1, 4 and 6. A third type of winding-up, members' voluntary liquidation, is not included because it does not involve insolvency.

6. The Insolvency Act 1986 and, in Northern Ireland, the Insolvency (Northern Ireland) Order 1989 also introduced the procedures of company administration orders and company voluntary arrangements (CVAs). The administration procedure gives a period of time during which creditors are restrained from taking action and a court appointed administrator puts forward proposals to deal with the company’s financial difficulties. The CVA procedure aids business by enabling a company in financial difficulty to come to a binding agreement with its creditors. These are listed separately under Table 3 for England and Wales and Table 5 for Scotland.

7. The Enterprise Act 2002 introduced revisions to the corporate administration procedures, replacing Part II of the Insolvency Act 1986 with Schedule B1. These include the introduction of additional entry routes into administration that do not require the making of an administration order and a streamlined process for Administrations whereby a company can in some circumstances be dissolved without recourse to liquidation. The primary objective of administration (and of CVAs) is the rescue of the company as a going concern. These provisions came into force on 15^th September 2003 and Administrations under the Enterprise Act have been included on Tables 3 and 5 from Q3 2003 (dissolution follows 3 months after a notice is filed with the Registrar of Companies, if no objections are raised by the court). On 27th March 2006 the Insolvency (Northern Ireland) Order 2005 introduced similar revisions to the corporate administration procedures in Northern Ireland, replacing Part III of the Insolvency (Northern Ireland) Order 1989 with Schedule B1.

8. Since the Enterprise Act 2002, a number of these streamlined administrations have subsequently converted to a creditors’ voluntary liquidation. These liquidations in England and Wales are not included under the headline figures here or at Table 1, as they do not represent a new company entering into an insolvency procedure for the first time. For completeness, however, they are included under Table 3d. It is also possible for the outcome of an administration to be entry into a company voluntary arrangement or a compulsory liquidation, but these cases are not separately identifiable from Companies House’ information and will therefore be included within the new case figures for these procedures (the numbers involved are relatively few, compared to those entering CVL). For Scotland and Northern Ireland, figures for creditors’ voluntary liquidation include those companies which had previously been in administration or other insolvency procedure, as insufficient data are currently available to separate them from the totals, prior to 2010.

9. Receivership appointments comprise administrative receivers appointed under the 1986 Insolvency Act (and the 1989 Order for Northern Ireland) and certain other receiver appointments, for example under the Law of Property Act 1925 - due to the use of the same statutory documentation for different types of receivership, it is not possible to give a breakdown between them. Law of Property Act receivers are classed as Enforcement of Security and are not insolvency procedures under the Insolvency Act of 1986. For this reason levels of, and trends in, receivership appointments should be interpreted with caution. The provisions of the Enterprise Act 2002 [section 250] (Insolvency [Northern Ireland] Order 2005 [Article 5]) have made some changes to the procedures for administrative receivership.

10. Figures sourced from Companies House (E&W) were revised previously (where appropriate) between 2007 Q1 and 2008 Q1. This reflected inaccuracies identified in the counting of cases during validation following the move to a new IT system in February 2008. The most noticeable revisions were to receiverships (where some companies had been counted more than once); the rest of this series prior to 2007 is not available on a revised basis. However, it should also be noted that because the revised counts have been run against a live database, they do not exactly reflect the original numbers of new cases that would have been reported.

11. Individual insolvencies in England and Wales and in Northern Ireland are made up of bankruptcy orders and individual voluntary arrangements (IVAs) (though see also paragraph 12 below regarding the introduction of debt relief orders (DROs) in England and Wales). Insolvent individuals in England and Wales are dealt with mainly under the Insolvency Act 1986. A bankruptcy order is made on the petition of the debtor or one or more of his creditors when the court is satisfied that there is no prospect of the debt being paid. (Figures for bankruptcy orders include orders relating to the estates of deceased debtors). There are also individual voluntary arrangements (IVAs) and deeds of arrangement (the latter under the Deeds of Arrangement Act 1914), which enable debtors to come to an agreement with their creditors. Table 2 summarises the above procedures for England and Wales (IVAs and Deeds of Arrangement are included under a single column) and Table 2a provides bankruptcy orders further split by petition type. Changes to bankruptcy law in England and Wales introduced by the Enterprise Act 2002 came into force on 1 April 2004 – the Act made no changes to the existing individual voluntary arrangement regime.

12. The Tribunals, Courts and Enforcement Act 2007 introduced a new route into personal insolvency called the debt relief order (DRO), which came into effect from 6 April 2009. DROs provide debt relief, subject to some restrictions, and are suitable for people domiciled in England and Wales who do not own their own home, have little surplus income (no more than £50 a month), assets (other than possibly a car) not exceeding £300, and less than £15,000 of debt. DROs do not involve the courts; they are run by The Insolvency Service in partnership with skilled debt advisers, called approved intermediaries. A DRO lasts for a period of one year before discharge and, as for bankruptcy, there are penalties in place for debtors who seek to abuse the process. Additional information may be found on The Insolvency Service website here: http://www.insolvency.gov.uk/bankruptcy/alternativestobankruptcy.htm. Table 2 includes DROs from the second quarter of 2009.

13.  The series for bankruptcy orders can not be seasonally adjusted from Q2 2009 onwards due to the introduction (wef 6 April 2009) of debt relief orders (DROs). DROs comprise some of those individuals who would have otherwise been declared bankrupt (a subset of DRO-eligible cases, who were advised of the DRO route and chose to take it) and other individuals who, perhaps, could not have afforded the fee to enter into bankruptcy and who may have otherwise been in an informal debt management process, or been unable to access any form of debt resolution. It is not possible to quantify the impact of the introduction of DROs on the number of bankruptcy orders, nor to adjust the latter for it and, as a result, not possible to compile a consistent seasonally adjusted series for bankruptcy orders. Table 2 therefore only shows bankruptcy orders (and the derived “total individual insolvencies”) on a seasonally adjusted basis up to the first quarter of 2009.

14. Table 2b records numbers of Income Payments Orders (IPOs) and Income Payments Agreements (IPAs) where the bankrupt makes regular payments from surplus income towards his/her debts for a period of time, either by court order or by agreement. The figures record numbers of IPOs/IPAs made in each period, they do not, in general, relate to the date of the original bankruptcy order. Table 2b records a number of IPAs before Q2 2004 because the IPA provisions of the Enterprise Act 2002 (commenced on 1 April 2004) were applicable, upon commencement, to pre-commencement bankruptcies.

15. Insolvent individuals in Scotland (Table 4) are subject to sequestration (bankruptcy) or protected trust deeds under the Bankruptcy (Scotland) Act 1985 (as amended). This Act was amended by the Bankruptcy (Scotland) Act 1993. On April 1 2008 the Bankruptcy and Diligence etc. (Scotland) Act 2007 came into force making significant changes to some aspects of bankruptcy, debt relief and debt enforcement in Scotland. Most notably, as far as these statistics are concerned, it introduced a new route into bankruptcy for people with low income and low assets (LILA). The sequestration figures for Q2 2008 onwards include these new LILA cases; therefore trends in numbers of sequestrations before and after this date should be interpreted with care. Protected trust deeds are voluntary arrangements in Scotland, but although they fulfil much the same role as individual voluntary arrangements, there are important differences in the way they are set up and administered. Details of both sequestrations and protected trust deeds are found on the register of insolvencies, which is maintained by the Accountant in Bankruptcy. Further information about insolvency in Scotland can be found on the Accountant's website at www.aib.gov.uk. It should also be noted that from April 2008, personal insolvency statistics have been extracted from information published on the AiB website (latest release 19 January 2011); whereas previously it was supplied on request, tailored to our publication requirements.

16. Insolvent individuals in Northern Ireland are dealt with under the Insolvency (Northern Ireland) Order 1989 and are recorded under Table 6. On 27 March 2006 the Insolvency (Northern Ireland) Order 2005 came into operation and implemented similar changes to bankruptcy procedures as the Enterprise Act 2002 introduced in England and Wales. Further information about insolvency in Northern Ireland can be found on their website at http://www.detini.gov.uk/deti-insolvency-index.htm.

17. Under the Insolvency Act 1986 and the Insolvent Partnerships Order and, in Northern Ireland, the Insolvency (Northern Ireland) Order 1989 and the Insolvent Partnerships Order (Northern Ireland) 1995, insolvent partnerships may be wound up as an unregistered company or administered following bankruptcy orders against the partners. Insolvent Partnerships can also enter administration or a voluntary arrangement.

18. Company insolvencies and bankruptcy orders (relating to the self-employed) in England and Wales broken down by industry are available from Q3 2007 according to the Standard Industrial Classification (SIC) 2003, bringing them into line with other official statistics.  Industry breakdowns for compulsory liquidations and bankruptcies (only) are only available one quarter in arrears of the headline series. Figures according to the previously used Insolvency Trade Classification (ITC) are available up to Q3 2006, but information by industry is not available for the period between Q4 2006 to Q2 2007 (inclusive) on either classification. Additionally, the broad split of bankruptcy orders into self-employed and other individuals is available under Table 2a.

19. Company liquidations in Scotland are available from Q1 2007 based on the SIC2003 industry breakdown and these can be found in Tables 4a and 4b. Earlier data are available separately classified according to the Insolvency Trade Classification (ITC).

20.  Information concerning insolvency legislation, policy evaluation and research in England and Wales may be obtained from the Insolvency Service website at www.insolvency.gov.uk.