The Insolvency Service has revealed that 119,850 people were declared insolvent in 2011, which is a 11.3% decrease on the record high of 2010. However, the number of companies going bust edged up by 1.3% compared with last year. The figures show that, for the first time, there were more IVAs than bankruptcies. Andrew Smith of ClearDebt believes this is because IVAs are now being arranged at much lower levels of debt than ever before. There was also a marked increase in Debt Relief Orders. There were 28,949 in 2011 of this newer method of insolvency generally used for lower levels of debt.
Nick O’Reilly of HW Fisher cautioned: “To qualify for a DRO, a person must have relatively small debts of less than £15,000. But there is every chance that those struggling with DROs now could slip into insolvency proper.” Ian Gould of PKF said that the surge in corporate insolvencies hadn’t hit yet.
Peter Cooper at Baker Tilly thinks it may have in the hotels and licensed sector where administrations have climbed by 19% in 2011. Hotels are primarily responsible for the increase. Frances Coulson of R3 thought that 2012 would be a difficult year too. Matt Henderson of Johnston Carmichael was concerned over the prevalence of liquidations in Scotland because “unlike other types of insolvency such as administration, it is not designed to save businesses.”