Reference Ins12/Coms/100
  Date 02 November 2012

STATISTICS RELEASE: INSOLVENCIES IN THE THIRD QUARTER 2012

Statistics showing insolvencies in the third quarter of 2012 are published today (02 November) by the Insolvency Service.

Click here to view the detailed tables from 2002

COMPANY INSOLVENCIES

There were 3,971 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales in the third quarter of 2012 (on a seasonally adjusted basis). This was a decrease of 2.8% on the previous quarter and 6.6% less than the same quarter a year ago.

This was made up of 1,092 compulsory liquidations (up 5.5% on the previous quarter but down 10.2% on the corresponding quarter of the previous year), and 2,879 creditors’ voluntary liquidations (which were down 5.6% on the previous quarter and down 5.1% on the corresponding quarter of the previous year). 

Additionally, there were 986 other corporate insolvencies in the third quarter of 2012 (not seasonally adjusted) comprising 277 receiverships, 548 administrations and 161 company voluntary arrangements. In total these represented a decrease of 21% on the same period a year ago. 

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 11)

There were 28,062 individual insolvencies in England and Wales in the third quarter of 2012. This was a decrease of 7.2% on the same period a year ago.

This was made up of 7,617 bankruptcies (which were down 20.5% on the corresponding quarter of the previous year), 7,777 Debt Relief Orders (DROs) (which were up 2.3% on the corresponding quarter of the previous year) and 12,668 Individual Voluntary Arrangements (IVAs) (which were down 2.9% on the corresponding quarter of the previous year). Bankruptcy numbers have been impacted by the introduction of DROs from April 2009, amongst other factors. Numbers of DROs are now higher than total bankruptcies for the first time, while Bankruptcy Orders have been lower than IVAs for the last six quarters.

In the third quarter of 2012, 6,040 bankruptcies were made on the petition of the debtor (representing 79.3% of total cases); the level of debtor petition bankruptcies has been following a generally decreasing trend since the beginning of 2009 when there were 17,606 (86% of the total). Creditor petition bankruptcy numbers have also been falling over a similar period, though less rapidly and less consistently. The percentage of bankruptcy orders involving trading debts (self-employed bankrupts) was 22.9% in the second quarter of 2012 (third quarter 2012 figures for trading-related bankruptcies are not yet available); higher than throughout the previous few years. This is due to the decline in numbers of cases involving consumer debts (non-traders) as may be seen in Figure 3 below.

COMPANY LIQUIDATION AND INDIVIDUAL INSOLVENCY RATES: LONGER-TERM PERSPECTIVE

In the twelve months ending Q3 2012, approximately 1 in 146 active companies (or 0.7% of all active registered companies) went into liquidation, similar to the previous quarter. As Figure 4 shows, the liquidation rate remains low compared to a peak of 2.6% in 1993, and the average of 1.2% seen over the last 25 years.  It should be noted that the number of active companies has changed considerably over this period; there were nearly 2.5 million active registered companies in Q3 2012; this compares with only about 900,000 in the early 1990s and less than 800,000 in 1986.

In the twelve months ending Q3 2012, approximately 1 in 390 people became insolvent. This is down from 1 in 382 in the previous quarter. As Figure 4 shows, the individual insolvency rate had displayed a steeply upward path (with some fluctuations) since 2004 and is currently still elevated compared to the annual average of 1 in 1,600 people (0.1%) 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 2002 are presented in the accompanying detailed tables). 

Notes to accompany the Insolvency Statistics 

Data sources and quality

(More details may be found in the Statement of Administrative Sources and the over-arching Statement on Quality Strategy, Principles and Processes, which cover all Official Statistics outputs from the Insolvency Service.) 

Relevance (the degree to which the statistical product meets user needs for both coverage and content)

1.       The official Insolvency Statistics are the most comprehensive record of the number of corporate and individual insolvencies in England and Wales. They include all formal types of insolvency procedure currently available. 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. The Statistics Release itself covers the most recent 11 years of annual and quarterly figures; while historic data series are also available (back to 1960 in some cases), as are related sets of Official Statistics on insolvency.

2.       Key users of insolvency statistics include the Insolvency Service itself, which has policy responsibility for insolvency in England and Wales and for the non-devolved areas within Scotland and N Ireland; other government departments; parliament; the insolvency profession; debt advice agencies; media organisations; academics; the financial sector; the business community and the general public. The headline quarterly statistics are widely reported in both national and regional media on the day of release.

3.       The statistical production team welcome feedback from users of the Insolvency Statistics (current contact details are provide at the end of these Notes). More formal engagement with users has recently  included a Consultation on Insolvency Service Official Statistics, the Government Response to which was published in December 2010, and stakeholder meetings held in January 2011 to explore Consultation respondents’ input and requests in more detail.

Accuracy and Completeness (including the closeness between an estimated or stated result and the [unknown] true value)

4.       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 from Companies House. All formal insolvency procedures entered into by a company, a partnership or an individual are required by law to be reported to the appropriate body, so the statistics should be a complete record of insolvency in the United Kingdom.

5.       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. The implication of this is that the published figures should capture all cases (on that definition) in a particular reporting period and they will not be influenced by, for example, the late reporting of orders made leading to missing data.  However, for compulsory liquidations and bankruptcy orders in E&W  from Q2 2011, new case numbers are reported against the date of the court order. This should be noted when making comparisons of trends over time. Furthermore, there is a formal audit process, by which each Official Receiver’s Office is reviewed on all aspects of case administration, including the quality and completeness of case information entered on to the administrative system. Targets are in place whereby an insolvency case should be entered onto the administrative system within two days of receipt to an Official Receivers Office. Details on compliance with this target can be found in the InsS’ Annual Report. Additional checks are in place to check for and remove duplication of cases, to ensure that returns cover all reporting areas, and to check consistency within tables and between related tables. 

Coherence (the degree to which data which are derived from different sources or methods, but which refer to the same phenomenon, are similar)

6.       The Insolvency Service also publishes personal insolvency statistics on a regional basis and outcome statistics for individual voluntary arrangements, both as Official Statistics. These report figures on an annual basis, and they differ from the headline quarterly Insolvency Statistics in that there are some differences in the case selection criteria and/or the database from which they are sourced; this means that the totals are not identical between different outputs. 

Timeliness and Punctuality (Timeliness refers to the elapsed time between publication and the period to which the data refer. Punctuality refers to the time lag between the actual and planned dates of publication.)

7.       The Insolvency Statistics are published on the first Friday of the second month following the end of the quarter being reported on; this is the earliest publication date which ensures receipt of all the data inputs, and allows sufficient time for liaising with data suppliers and completing all the steps between this and compilation of the statistical release in its final form ready for publication.

8.       There is a publication schedule for a year ahead available on the UK National Statistics Publication Hub and the statistics have always been published on target.

Accessibility and Clarity (Accessibility is the ease with which users are able to access the data. It also relates to the format in which the data are available and the availability of supporting information. Clarity refers to the quality and sufficiency of metadata, illustrations and accompanying advice)

9.       The Insolvency Statistics are available free of charge to the end user on the Insolvency Service website. They are released via the Publication Hub and they meet the standards required under the Code of Practice for Official Statistics and the Insolvency Service’s own website accessibility policy.

10.   Historic data are also published for the key series, as are a number of other Official Statistics on insolvency. A range of supporting information is available on the Statistics website pages here : Information about Insolvency Service Official Statistics

Comparability (the degree to which data can be compared over time and domain)

11.   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.

12.   See also paragraphs 19, 20, 21 and 25 under the heading Subject Context below for additional specific aspects relevant to comparability.

Methods and Revisions

(More details may be found in : Insolvency Statistics Methodology and : The Insolvency Statistics Revisions Policy) 

13.   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. 

14.   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.

15.   Compulsory liquidation and bankruptcy orders are based on the Order Date from Q2 2011 (See note 5 above) and are revised for the previous three quarters in the release following the end of each financial year. 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.

16.   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).

Subject context

(including relevant insolvency legislation, policy and practice in England and Wales, Scotland and Northern Ireland).

17.   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.

18.   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.

19.   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.

20.   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.

21.   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.

22.   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 23 below regarding the introduction of debt relief orders (DROs) in England, Wales and Northern Ireland). 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.

23.   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. In April 2011 a change was introduced to Debt Relief Order legislation to allow those who have built up value in a pension scheme to apply for debt relief under these provisions; this will have increased the numbers of those eligible to apply for a Debt Relief Order. 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.bis.gov.uk/insolvency/personal-insolvency/bankruptcy-what-is-bankruptcy/what-alternatives-bankruptcy. Table 2 includes DROs from the second quarter of 2009. The Debt Relief Act 2010 introduced DROs to Northern Ireland, which came into force on 30th June 2011.  Table 6 includes DROs from the third quarter of 2011.

24.   Table 2b records total 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 bankruptcy cases subject to an IPO/IPA made in each period, they do not, in general, relate to the date

of the original bankruptcy order.  IPAs were introduced under the provisions of the Enterprise Act 2002 (commenced on 1 April 2004).  Prior to December 2010 a proportion of surplus disposable income was allowed to be retained by the bankrupt, post December 2010 all surplus disposable income was claimed by the Official Receiver as trustee. Another change in policy was implemented at the same time in that the minimum payment sought under an IPO/IPA reduced from £50 per month to £20 per month.  Additional information on IPOs and IPAs is available here: http://www.bis.gov.uk/insolvency/personal-insolvency/income-payments-orders-and-agreements

25.   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.

26.   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. The Debt Relief Act 2010 introduced DROs to Northern Ireland w.e.f. 30^th June 2011. Further information about insolvency in Northern Ireland can be found on their website at http://www.detini.gov.uk/deti-insolvency-index.htm.

27.   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.

28.   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 2010, which were issued in an ONS statistics bulletin on 6 December 2011. More detailed figures are available via the on-line database NOMIS. Additionally, the ‘Business Population Estimates for the UK and Regions’ (formerly the ‘Small and Medium Enterprise statistics’) report, published by BIS, estimates the total number of private sector businesses in the United Kingdom at the start of 2012 at 4.8 million.

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

30.   The adult (18+) population data for England and Wales are created using annual mid-year population estimates by single year of age sourced from the ONS Population Estimates Unit: http://www.ons.gov.uk/ons/taxonomy/index.html?nscl=Population+Estimates

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