Number of insolvencies on the rise as Britain heads for Brexit buffers

The problem with writing about economics is that it’s all about numbers and numbers don’t say much to most people. Economists and experts get very excited about them but sometimes struggle to give them context to the people riding the fabled Clapham Omnibus.

The 2018 figures released this morning by the Insolvency Service for England and Wales are a case in point.

What they show is that the underlying number of companies hitting the wall last year hit 16,090, the highest level since 2014, and a ten per cent rise on the previous year. The number of personal insolvencies came in at 115,229, the highest level since 2011.

There was a fall in underlying corporate insolvencies in the final quarter of the year when compared to the third quarter. But as a comfort that ranks alongside the supermarkets saying that they’ve tried to find space to stockpile some tins to take the place of the fresh food that’s going to be rotting in ports in the event that Theresa May and her Tories skewer the lot of us with a no deal Brexit.

Most people, however, will probably see them and think, oh dear, that’s sad, before moving on with their lives.

What the Insolvency Service’s release with its graphs, and its detailed granular analysis on the different types of insolvency doesn’t do is explore the reality which is that every single one of those 115,229 personal insolvencies, and each of the 16,090 corporate insolvencies, represent a tragedy, an end point preceded by months and sometimes years of pain, and often followed by more of it.

Personal insolencies often follow corporate ones. People working for companies that go down find themselves thrown out of work without redundancy settlements. That is a situation the workers at Patisserie Valerie, one of the more notable insolvencies of late, are facing up to.

An interesting wrinkle in the figures is that Individual Voluntary Arrangements (IVAs) reached a record. These are marketed, sometimes quite aggressively, as a sort of ‘soft’ personal insolvency, an easier way out than bankruptcy.

Clear 85 per cent of your debts, says one of the first Google results when you put those three letters in. It looks wonderful. Something sent down from heaven.

What that intro doesn’t say is that those who take them out will still be expected to spend five or six years paying agreed sums to their creditors, or that they often very expensive to get set up. They can still be worthwhile for people who have homes, or businesses, or other assets they don’t want to lose. But even if they do result in the write off of 85 per cent of a holder’s debts, the repayment schedules are hardly designed to be easy. People who fail keep up may still be forced into bankruptcy.

The worry is that there may be more to come as the economy starts to suffer from the impact of the Conservatives’ disastrous mishandling of Brexit.

R3, the insolvency practitioners’ trade body, says its members across the UK reported that demand for their services, which range from advice on turnaround and restructuring processes to formal insolvency procedures, increased last year and that this has carried over into the start of 2019. When these businesses are entering the sunlit uplands it doesn’t bode well for others.

R3 says it would “encourage directors of companies which are finding current market conditions tough to seek out knowledgeable and qualified advice from a professional source. The earlier a company seeks advice, the more options it will have”. Sound advice. The same could be said of individuals facing financial difficulties.The numbers of both look set to continue growing.