Insolvency figures fall after record highs last year
The number of people going insolvent between April and June has eased back from record highs last year, official figures show.
Some 22,772 people went insolvent across England and Wales in the second quarter of this year, a 0.1% decline compared with a year earlier and 9.7% fall in contrast to the quarter before.
The latest figures mean one in every 489 adults became insolvent over the past 12 months, a slight drop in comparison to the first-quarter rate of one in 486, according to the Insolvency Service.
Personal insolvencies consist of bankruptcies, individual voluntary arrangements (IVAs) and debt relief orders (DROS).
The second-quarter decline was driven by a 15.6% drop to 12,854 in IVAs, which are agreements where money is shared out between creditors.
Meanwhile, DROs grew marginally to 6,146 quarter on quarter, while bankruptcies fell by 2.5% to 3,772 over the period.
Focusing on businesses, 4,547 firms entered insolvency between April and June, rising 12.6% in contrast to the first quarter.
The rise was underpinned by a "one off event", which saw 1,131 connected personal service companies (PSCs) enter creditors' voluntary liquidation (CVL) in response to changes to claimable expense rules.
Stripping out the impact of the PSCs, company insolvencies dropped by 15.4% over the period to a 17-year low.
The Insolvency Services said there were 3,454 CVLs in the second quarter, a 15% rise in compulsory liquidations to 672 and 421 other insolvencies.
Richard Tett, London head of restructuring and insolvency at Freshfields Bruckhaus Deringer, said: "For now, lending conditions remain strong and default and insolvency rates and UK profit warnings are all very low - indeed, the underlying company insolvency rate is the lowest on record - but for how much longer will these benign conditions last, and when conditions do change, will there be a bump?
"The level and terms of the debt currently being taken on by companies are seen by some as concerning, with European leveraged debt issuance almost three times greater for the first half of 2017 than for 2016 over the same period.
"Separately, the markets are worried about signs of complacency around mounting consumer debt."
Brian Johnson, insolvency partner at chartered accountants HW Fisher & Company, said the low interest rate had "continued to flatter" the individual insolvency figures.
He said: "Though number of people tipping into insolvency continues to fall, the insolvency rate has barely budged.
"At 0.2% of the population it remains over double the level it was at for the two decades leading up to 2005.
"People unable to clear their debts now have a greater range of options open to them, but the fact remains that years of cheap credit have led thousands of people to rack up debts that they will quickly find unmanageable when, not if, interest rates rise.
"For now the sky appears clear but even a slight increase in interest rates could cause the debt storm to break."
Adrian Hyde, president of insolvency and restructuring body R3, said: "Once you strip out another one-off wave of liquidated personal service companies linked to tax changes, a recent run of quarterly increases in underlying insolvency numbers has been checked back sharply.
"The figures are pretty surprising given insolvency practitioners have been reporting a tougher time for businesses in 2017.
"The unexpected drop in inflation last month is one hint that things may have eased up for businesses since the end of 2016, and while the Bank of England has been warning about rising consumer debts, businesses will still be benefiting from debt-fuelled spending in the short-term at least."