Insolvencies
Insolvency Service figures show a 10.5% lift on the quarter in compulsory liquidations and creditors' voluntary liquidations in England and Wales during the three months to June, to a total of 3,978. (Reuters)

Company insolvencies jumped in the second quarter despite an improvement in the UK economy's fortunes.

Figures from the government's Insolvency Service show a 10.5% lift on the quarter, in compulsory liquidations and creditors' voluntary liquidations in England and Wales, during the three months to June. The total stands at 3,978.

Year-on-year this is a 2.1% decline.

This comes at a time when growth in the UK economy is accelerating, having lifted from 0.1% in the first three months of the year, to a 0.6% expansion in the second quarter.

"What a difference an adverse quarter makes. After four years of steadily falling levels of insolvency, this time three months ago some were talking not just of light at the end of the tunnel, but being out of it," said Nick O'Reilly, Insolvency Practitioner at the chartered accountants HW Fisher & Company.

"The second quarter's surprise jump in both company liquidations and individual insolvencies have made that view look dangerously complacent.

"There is no doubt the economy is rebounding, but there is nothing inevitable about continued falls in insolvency. There will always be a degree of structural insolvency - a level below which it simply cannot fall."

O'Reilly added: "A return to confidence in the economy can also trigger a spike in insolvency if more business owners take the opportunity to abandon deadwood companies and start new ones."

The Insolvency Service also reported that individual insolvencies reached 25,717 over the three month period, a 6.1% annual fall.

"On the surface the drop in individual insolvencies during the second quarter is good news but it does not accurately portray what's happening on the ground," said Melanie Giles, a licensed insolvency practitioner at PJG Recovery.

"This data is a small snapshot only and does not capture the huge, and almost certainly growing, number of unregulated debt management plans out there. The reality is that many households, as highlighted this week by the Money Advice Service, are still struggling to cope. More than half of people surveyed said they were struggling.

"Consumer confidence returning is a good thing but it will result in people taking on more credit, which, given how indebted many households still are, could prove ugly. Unfortunately, many households don't know how much in debt they are until something extreme happens, like someone losing a job."