Businesses going bust as insolvency rises in 2016
16,502 companies entered insolvency in 2016, compared to 14,657 the year previous
The number of businesses going bust and entering insolvency increased in 2016, according to new government statistics.
A report by The Insolvency Service has revealed that 16,502 companies faced financial ruin in 2016, compared to just 14,657 the year previous – an increase of 12.6%.
It’s suggested a change in legislation regarding claimable expenses is a possible reason for the increase, with 1,796 enterprises liquidating between October and December 2016 alone.
Despite the increase, 2016’s rate of insolvency is actually the second-lowest in 11 years, suggesting businesses are still generally preforming better than they were in years previous.
Creditor voluntary liquidation (72.1%) was the most common type of liquidation firms fell victim too, followed by compulsory liquidations (17.6%), administrations (8.2%), company voluntary arrangements (2.0%) and receiverships (less than 0.1%).
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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