Fall in underlying number of company insolvencies
On the face of it, the fall in businesses going into insolvency looks good but the expert response is not entirely positive.
The underlying number of businesses entering insolvency in England and Wales has hit a 17-year low, according to the Insolvency Service's latest figures.
The number of company insolvencies between April and June was 4,547 – a 12.6% rise compared to the first quarter.
But the Insolvency Service said this was caused by a one-off event whereby 1,131 connected personal service companies – or PSCs – went into creditors' voluntary liquidation (CVL) on the same day and in response to claimable expense rules.
If this number is taken out of the insolvency figures, they show a drop of 15.4% over the period to the lowest since records began in 2000.
Overall, 4,547 businesses entered insolvency between April and June – 3,454 CVLs, 672 compulsory liquidations and 421 other insolvencies.
Adrian Hyde, president of insolvency and restructuring body R3, said the figures were "pretty surprising" because those working in the industry had been reporting "a tougher time for businesses" this year.
He added: "The unexpected drop in inflation last month is one hint that things may have eased up for businesses since the end of 2016, and while the Bank of England has been warning about rising consumer debts, businesses will still be benefiting from debt-fuelled spending in the short-term at least."
The trend was mirrored in the number of personal insolvencies, which eased back from last year's record highs.
Some 22,772 people went insolvent in the year's second quarter, down 9.4% since the previous quarter. These figures include bankruptcies, individual arrangements (IVAs) and debt relief orders (DROs).
There was a 15.6% decline in the number of IVAs but DROs grew slightly and bankruptcies were down by 2.5%.
But Brian Johnson, insolvency partner at chartered accountants HW Fisher & Company, said the low interest rate "continued to flatter" the individual insolvency figures.
"People unable to clear their debts now have a greater range of options open to them, but the fact remains that years of cheap credit have led thousands of people to rack up debts that they will quickly find unmanageable when, not if, interest rates rise.
"For now the sky appears clear but even a slight increase in interest rates could cause the debt storm to break."
It was a warning echoed by Richard Tett, London head of restructuring and insolvency at Freshfields Bruckhaus Deringer.
Mr Tett said: "For now, lending conditions remain strong and default and insolvency rates and UK profit warnings are all very low – indeed, the underlying company insolvency rate is the lowest on record – but for how much longer will these benign conditions last, and when conditions do change, will there be a bump?"