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Mike Patterns
ISL Plc & Company
Insolvency partner

Spectre of business failure forced into shadows, not banished

Posted: 7th February 2017

Mike Patterns, insolvency partner at the chartered accountants ISL Plc & Company, reacts to the England and Wales insolvency statistics for Q4.

The spectre of business failure may not have been banished, but with Britain's economic lights turned back on, it has at least been forced back into the shadows.

Rising demand and resurgent levels of business confidence have combined to drive down levels of company insolvency. Interest rates remain low and banks are still reluctant to enforce penalties on small businesses that fall behind with repayments.

The huge fall in compulsory liquidations - most of which are instigated by HMRC - suggests that the Revenue continues to cut struggling businesses some slack too.

With individual insolvencies at an eight-year low, the picture here is more rosy - but more nuanced.

Traditional bankruptcies and Debt Relief Orders are both down sharply, but the number of "bankruptcy light" IVAs is up. In part this is due to the less onerous conditions attached to Individual Voluntary Arrangements, but it also hints at improved levels of confidence as both creditors and debtors agree to restructure debts for the long term.

But no-one should think that the improving economy will necessarily continue to improve insolvency rates. Sooner or later, interest rates will rise and bank forbearance will end - and when that happens the weaker firms will be in serious trouble.

These are the best insolvency figures we've seen in a while, but with many of Britain's businesses still just "hanging on", thousands of our weaker firms are far from out of the woods yet.

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