Additionally, creditors’ voluntary liquidations in England and Wales decreased to the lowest annual total since 2008. There were 10,302 companies entering into creditor’s voluntary liquidation in 2014, a 9.3% decrease compared to 11,358 in 2013, marking the lowest annual total since 2008.
A total of 14,040 companies entered into liquidation in 2014, which was 6.3% lower than the total in 2013 and the lowest annual total since 2007. There has been a decreasing annual trend in company liquidation since 2011.
However compulsory liquidations increased in 2014. A total of 3,738 companies were subject to a compulsory winding-up order in 2014, a 2.9% increase compared to 2013.
Other types of company insolvency continued to fall year on year. The number of administrations in 2014 was 24.3% lower than in 2013, and at its lowest level since 2004. Receivership appointments decreased by 21.1% and were at their lowest annual level since 2007, while the number of company voluntary arrangements decreased by 2.4% to their lowest total since 2007.
In the 12 months ending Q4 2014, 1 in 190 active companies (or 0.53% of all active companies) went into liquidation, down from 1 in 186 in the 12 months ending Q3 2014, and 1 in 165 in the 12 months ending Q4 2013. This continues the downwards trend in the rates from 2011. The liquidation rate was at its lowest level since 1984, the earliest date it is possible to calculate the rate.
Changes in company liquidation rates are related to economic conditions: in periods of economic growth, liquidation rates tend to decrease. The liquidation rate peaked at 2.6% (24,400 companies) in the year ending March 1993, over a year after the end of the 1990s recession. The next sustained increase in the rate coincided with the 2008-09 recession, when 0.9% (20,500 companies) entered liquidation in the year ending December 2009.
In Q4 2014 there were 384 administrations, a decrease of 18.2% compared with the previous quarter, 35.9% lower than the same quarter in 2013, and the lowest quarterly total since Q1 2004. There were 1,790 administrations in the calendar year 2014, a decrease of 24.3% compared with 2013 and the lowest annual total since 2004.
The number of companies entering creditors’ voluntary liquidation increased by 4.4% compared with Q3 2014, with the last two quarters showing a reversal of the previous downward trend. However, compared with the same period in 2013, there were 7.6% fewer cases.
Compulsory liquidations remained at trend levels. The number of companies subject to a compulsory winding-up order has decreased for the last three quarters, but remained in line with a fairly stable trend seen since mid-2012. In Q4 there were 824 compulsory liquidations, a decrease of 4.2% on the previous quarter. The number of compulsory liquidations increased by 17.9% compared with the same quarter in 2013, but this large increase is because of an unusually low number of cases in Q4 2013. There were 3,738 companies subject to a compulsory winding-up order in the calendar year 2014, a 2.9% increase compared to 2013.
Other types of company insolvency all decreased on the previous quarter. The number of companies entering administration decreased by 18.2% in Q4 2014 compared to the previous quarter, and 35.9% on Q4 2013
Louise Brittain, Council Member of R3, the insolvency trade body, said:
“Although corporate insolvency has fallen over 2014, it’s notable that compulsory liquidations have risen slightly. This may be a sign that creditors may be becoming less lenient to debtors than they have been since the financial crisis.”
“Overall though, despite a very slight rise in insolvencies in the last quarter, low interest rates and falling inflation are combining to help keep insolvencies low. The number of companies going through an insolvency process is almost down to pre-financial crisis levels, although it’s taken seven years to get to this point.”
“In the short-term, the first quarter of the year often sees an increase in insolvencies as companies whose Christmas revenues failed to meet expectations consider their options. After that, market changes and economic uncertainty caused by election results here and in particular, abroad could also have an effect.”
“How big an impact eventual interest rate rises will have on businesses remains unknown. Although initial rate rises are likely to be very small, there are many businesses – and households – already at their financial limits.”
Brian Johnson, insolvency partner at the chartered accountants HW Fisher & Company, commented:
"So far, so good. With the UK economy firmly back in gear - and set to overtake Germany in the global growth league - the number of business casualties is falling steadily.
"But a few warning lights remain stubbornly on. While company liquidations are thankfully back down to pre-crisis levels, seven years of pain mean some sectors remain very fragile.
"Many SMEs who supply large firms are being forced to accept ever longer payment terms for their work, especially in the construction and retail chain sectors.
"This is putting a severe strain on cash-flow for businesses that are already under pressure. Construction - which bore the brunt of the recession more than most - contracted by 1.8% in the last quarter of 2014. With many construction firms already barely surviving on very low margins, this is a real worry.
"And while shoppers may be benefitting from the supermarket price war, for suppliers and haulage companies the price cutting is already causing substantial pain.
"Most companies are feeling the benefit of Britain's return to growth and strong demand, so while fewer firms are going to the wall, these encouraging numbers are far from an unalloyed triumph."
