Insolvency Office statistics reveal that the company liquidation rate in England and Wales is at its lowest level since records began in 1984. There has been a continuous downward trend in the rate since 2011.
In the 12 months to the end of September 2016, 0.41 per cent of active companies (about one in 244) went into liquidation. At the same point last year 0.46 per cent of companies (one in 215) had collapsed into liquidation in the previous 12 months.
Economic conditions are the major factor in acquisitions rate fluctuations. In times of negative economic growth, liquidation rates tend to rise. In the year to March 1993 (just over 12 months after the 1990s recession ended) the liquidation rate was at its highest level at 2.6 per cent. The next peak in the liquidation rate occurred in 2009 following the 2008/9 recession, when 19,200 companies entered liquidation (0.9 per cent).
Although the actual number of liquidations was only marginally higher in 1999, the liquidation rate was much higher than in 2016 as there are nearly twice as many registered companies now than in 1999.
For those who are wondering, a liquidation is a legal process in which an insolvency practitioner is appointed to wind up the affairs of a limited company. The general purpose of a liquidation is to sell the company’s assets and distribute any proceeds to its creditors. At the end of the liquidation process, the company is dissolved and effectively ceases to exist.