Insolvencies: business failures slowing but individual insolvencies climbing

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individual insolvencies rise signalling storm clouds overheadI generally concentrate on the quarterly insolvency statistics for businesses since my blogs are designed to help SMEs.
However, there has been a worrying trend in the numbers of individual insolvencies and in the latest quarter’s figures, from April to June 2018, released by the Insolvency Service they had reached their highest level since the first quarter of 2012.
This could have implications for businesses, especially those that depend heavily on consumer spending.
Company insolvencies for Q2 2018
While company insolvencies are still higher than they were in the same quarter in 2017 decreases in compulsory liquidations, administrations and underlying creditors’ voluntary liquidations meant that the underlying numbers of insolvencies had decreased.
Total company insolvencies for April to June decreased by 12.4% compared to the first quarter of 2018 while the underlying number of insolvencies decreased by 2.0%. However, insolvencies were still 12% higher than for the same quarter in 2017.
The construction industry and the wholesale and retail trades still top the list of failing companies as has been the trend for some months.
During the first half of 2018 there were 196 CVAs which is hardly any increase on the 171 CVAs in the same period of 2017. I suspect a large proportion of these were accounted for by retail businesses looking to reduce their rent as evidenced by the high-profile examples we have been reading about in the press.
Individual insolvencies for Q2 2018
The numbers for individuals getting into financial difficulties are noteworthy, because they have been steadily increasing since 2015 and sooner or later are likely to impact on SMEs as mentioned above.
IVAs (Individual Voluntary Arrangements) reached a record high between April and June and individual insolvencies increased by 4.4% in this quarter when compared with January to March 2018.
It may be that a combination of factors is at play here, in that prices have been rising since the EU referendum vote as the value of £Sterling against other currencies has plummeted, making imports more expensive, while wage growth has been slow and the proliferation of low-skill, low-wage employment or uncertain zero-hours contracts has put pressure on individual finances. Also access to credit is becoming more difficult as regulation has begun to restrict loans to those who cannot prove their ability to repay debt.
This month’s key Indicator will explore all this in more detail when the focus will be consumer spending and potential changes in spending and saving habits.
I hope it will provide useful insights for you as SMEs.