Small Business Insolvency Rates Rose In 2016, But Still Second Lowest Level In 11 Years
An estimated total of 16,502 companies entered insolvency in 2016, a rise of 12.6% on the year before
The number of small businesses entering insolvency rose in 2016, but is still at its lowest level in 11 years, according to new government statistics released today.
A report by The Insolvency Service has revealed that an estimated total of 16,502 companies entered insolvency in 2016, a rise of 12.6% on the year before.
A change in legislation regarding claimable expenses is seen as a possible factor for the increase, with 1,796 enterprises liquidating in Q4 alone.
Worrying still, the estimated liquidation rate in 2016 was 0.47%, compared with 0.44% in 2015, representing an increase for the first time since 2009.
With regards the different type of liquidation, creditor voluntary liquidation was the most common form, accounting for 72.1% of total insolvencies.
This was followed by compulsory liquidations (17.6%), administrations (8.2%), company voluntary arrangements (2.0%) and receiverships (less than 0.1%).
14,657 businesses entered insolvencies in 2015, compared to 16,319 in 2014 and 17,682 in 2013.
Mark Sands, personal insolvency partner at consultancy RSM, said:
“In 2015 we saw the lowest levels of personal insolvency in over a decade, but the latest figures for 2016 show that the tide has now turned.
“Despite record low interest rates and high employment levels during the year, many more people found that they could no longer keep on top of their debts.
“The Bank of England has recently warned of ‘ballooning levels of household debt’ which are being driven by historic low rates. This is increasing the risk that some borrowers will bite off more than they can chew. As a result, we expect to see levels of personal insolvency rise throughout 2017.”
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