National statistics

Methodology and Quality Document - Company Insolvency Statistics July to September 2021

Published 29 October 2021

The United Kingdom Statistics Authority has designated these statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics.

Designation can be broadly interpreted to mean that the statistics:

• meet identified user needs;
• are well explained and readily accessible;
• are produced according to sound methods; and
• are managed impartially and objectively in the public interest.

Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

1. Data Sources and data validation

Individual-level company insolvency data for England and Wales, Scotland and Northern Ireland were sourced from Companies House (except for compulsory liquidation data for England and Wales and Northern Ireland, see below). Companies House conducts a series of basic checks on the data, including the removal of duplicate records, prior to supplying the Insolvency Service quarterly snapshots of data to compile company insolvency statistics. Note that Companies House does not verify the accuracy of all information filed, as outlined in their disclaimer published on the Gov.uk website.

Aggregate data for compulsory liquidations in Northern Ireland were sourced from the Department for the Economy. The Insolvency Service does not conduct any further validation on these aggregate data.

Individual-level compulsory liquidation data for England and Wales were sourced from the Insolvency Service case information system (ISCIS). Note that the validation processes for these data changed ahead of the release of these statistics for Q1 2021, resulting in a high volume of small revisions. Details of the methodology changes and the impact of these change are discussed in the ‘Revisions’ section below. Companies House separately provides snapshot figures for active companies as at the end of each month in England and Wales, Scotland, and Northern Ireland. These data were used to calculate company liquidation rates and are separately published by Companies House on the Gov.uk website

More information on the administrative systems used to compile these insolvency statistics can be found in the Statement of Administrative Sources.

2. Methodology

2.1 Seasonal adjustment of data

Seasonal Adjustment is the process by which patterns in a data series that are due to seasonal or other calendar influences are removed to produce a clearer picture of the underlying behaviour of the data. This process enables quarter-on-quarter comparisons to be made.

Most data series for England and Wales have been tested for seasonality, as described in the latest review of seasonal adjustment. The series for Scotland and Northern Ireland do not demonstrate consistent seasonality and only the unadjusted series have been presented, as agreed with the relevant officials in the devolved administrations.

Seasonal adjustment was carried out using the X13-ARIMA-SEATS program (developed by the US Census Bureau), the recommended program for UK National Statistics.

The seasonal adjustment models for England and Wales are typically reviewed on an annual basis, in accordance with the Insolvency Service Official Statistics Revisions Policy.

However, the trend in insolvencies in during the 2020/21 financial year has reflected a very different pattern to that seen in previous years, largely a result of the coronavirus (COVID-19) pandemic. Therefore the 2021 review was not conducted and England and Wales data for 2021 continues to be seasonally adjusted using the 2020 model.

Full details of the 2020 seasonal adjustment review and the models used to adjust these data can be can be found on the Gov.uk website.

2.2 Calculation of rates

The numbers of companies that went into liquidation in each location via compulsory liquidation or creditors’ voluntary liquidations (CVLs) (including those who entered CVL after administration) were divided by the mean average number of all active companies registered with Companies House in the same location during the same period.

The rates presented for each quarter reflect a four-quarter rolling rate per 10,000 active companies. Therefore, the Q3 2021 rates, for example, were calculated using data covering the period Q4 2020 to Q3 2021.

The insolvency rate gives an indication of the probability of a company entering liquidation in the previous four quarters. As the rates are calculated as a proportion of the total number of active companies, they are more comparable over longer time periods than the absolute numbers.

2.3 Tabulating numbers of company insolvencies

The main series of company insolvency tables present the overall numbers of company insolvencies in each quarter over the past 10 years, since January 2011, as well as annual totals. Tables 1a and 1b present seasonally adjusted and non-seasonally adjusted tables for England and Wales. The commentary for these statistics refers to the seasonally adjusted figures so that reliable quarter-on-quarter comparisons can be made. Table 4 presents the non-seasonally adjusted numbers for Scotland. Table 6 presents the non-seasonally adjusted numbers for Northern Ireland.

Company insolvency data, as provided by Companies House were tabulated by insolvency type (CVLs, administrations, company voluntary arrangements (CVAs) and receivership appointments) and quarter in which each insolvency was registered with Companies House. Therefore, numbers reflect company insolvency registrations rather than insolvency procedure ‘start’ dates. Start dates vary across procedures e.g. administrations are ‘started’ once an administrator has been appointed; CVAs ‘start’ upon date of creditor agreement.

Compulsory liquidation data for England and Wales, sourced by the Insolvency Service, are reported by court order date, thus providing a more accurate measure of the number of new cases in each quarter. However, these figures are considered provisional since any future cases later considered as a duplicate, and any cases later rescinded will be removed from the underlying data. Furthermore, there may be a lag in cases being recorded on the administrative system, meaning that numbers from previous quarters may subsequently be revised upwards. These figures are therefore marked as ‘provisional’ in the accompanying tables.

Companies that entered CVL following administration are excluded from Tables 1a and 1b since they have already been captured as administrations and therefore would be counted twice. However, Table 2 separately presents these (non-seasonally adjusted) numbers since January 2011.

Between April 2016 and early 2019 there were a high number of CVLs registered for companies that should have only registered one CVL. Tables 1c and 1d present the (seasonally adjusted and non-seasonally adjusted) numbers of ‘bulk’ CVLs and the overall totals including ‘bulk’ CVLs.

Company liquidation rates are presented in Table 3a for England and Wales. Table 3b separately presents the total liquidation rates for England and Wales to include the ‘bulk’ CVLs registered between 2016 and 2019, for users who wish to consider the trends over time that include these cases. Table 5 presents the rates of company liquidation in Scotland. Table 7 presents the rates of company liquidation in Northern Ireland.

2.4 Tabulating insolvency by industry tables

The additional series of accompanying industry tables presents quarterly numbers of insolvencies by industry in accordance with the 2007 Standard Industrial Classification (SIC).

Company insolvency data as supplied by Companies House, contains a mixture of the 2003 and 2007 Standard Industrial Classification (SIC). Where a 2003 SIC code has been supplied, it has been converted to a 2007 code using a ‘best match’ approach using weighted tables provided by the Office for National Statistics. Where more than one SIC code is recorded, only the first listed, or the primary, code is used.

These statistics present company insolvencies for England and Wales, and Scotland to the three-digit SIC 2007 level. Statistics are not presented for Northern Ireland due to small numbers.

For information on SIC 2007, including its structure and more detailed information on which industries are included, please see the Office for National Statistics website.

Before the Q2 2021 release of these statistics, the industry tables included bulk CVLs registered between 2016 and 2019 (see glossary). In the Q2 2021 release and all subsequent releases, these have been removed to give a more accurate representation of the number of companies within each industry entering insolvency.

3. Revisions

These statistics are subject to scheduled revisions, as set out in the published Revisions Policy. Other revisions tend to be made as a result of data being entered onto administrative systems after the cut-off date for data being extracted to produce the statistics. Any future revisions will be marked with an ‘[r]’ in the relevant tables.

3.1 Non-routine revisions since previous release

Due to an error resulting in missing dates for some cases, 73 CVLs in Q3 2020 (4% of the total in this quarter) were not included in previous editions of this publication. This has now been corrected.

The process for identifying and removing companies in the data with duplicate liquidations has been improved, resulting in a large number of revisions to the numbers of all types of company insolvencies. However, these revisions are small (no more than three in any quarter).

Improvements to the process for matching Companies House data to Insolvency Service data for compulsory liquidations resulted in a large number of revisions to Tables A1a-c and A3a-c of the Industry tables. This is a result of more cases using the SIC code recorded by Companies House instead of the SIC code recorded for the case on the Insolvency Service system. The SIC code recorded by Companies House is more likely to be accurate.

4. Quality

This section provides information on the quality of these quarterly individual insolvency statistics, to enable users to judge whether the data are of sufficient quality for their intended use.

The section is structured to align with the Quality Assurance Framework of the European Statistical System for statistical outputs.

Relevance: The degree to which the statistical product meets user needs in both coverage and content.

These statistics present individual insolvencies for England and Wales, Scotland and Northern Ireland and are the most comprehensive record of the number of individual insolvencies in the UK.

Key users of insolvency statistics include the Insolvency Service itself, which has policy responsibility for insolvency in England and Wales and for the non-devolved areas within Scotland and Northern Ireland; other government departments; parliament; the insolvency profession; debt advice agencies; media organisations; academics; the financial sector; the business community and the general public. Insolvency statistics are typically widely reported in national, regional and specialist media on the day of release.

The statistical production team welcomes feedback from users of the Insolvency Statistics and can be emailed at statistics@insolvency.gov.uk.

Accuracy and Reliability: Accuracy is the proximity between an estimate and the unknown true value. Reliability is the closeness of early estimations to subsequent estimated values.

All formal insolvency procedures entered into by a company, a partnership or an individual are required by law to be reported to the appropriate body, so Insolvency Service statistics should be a complete record of insolvency in the United Kingdom.

Numbers of insolvency cases are typically based on the date they were registered onto the relevant administrative recording system, and so it should be noted when making comparisons of trends over time, that trends can be influenced by late reporting.

Checks are in place to identify and remove duplication of cases, to ensure that returns cover all reporting areas, and to check consistency within tables and between related tables. Note that data are extracted from live administrative systems and therefore subject to routine revisions as systems are updated.

Timeliness and Punctuality: Timeliness refers to the elapsed time between publication and the period to which the data refer. Punctuality refers to the time lag between the actual and planned dates of publication.

Quarterly company insolvency data were provided to the Insolvency Service by Companies House approximately ten working days after latest quarter end.

Typically, these statistics are scheduled to be released one month after quarter end. This is to allow time to extract and compile the statistics. Additionally, the quarterly company and individual insolvency cannot be published ahead of the release of quarterly statistics for Scotland published by the Accountant in Bankruptcy (AiB), nor the quarterly release of the official statistics published by Companies House on numbers of companies on the active register.

Top-level AiB statistics to Q3 2021 (published on 27th October) were presented within these individual insolvency statistics, and Companies House data (published on 28th October) were used to calculate company liquidation rates in the quarterly company insolvency statistics.

Where a scheduled release date falls on a Monday the scheduled release has been pushed forwards by a day, to the Tuesday, to ensure compliance with the Pre-release Access to Official Statistics Order.

The publication schedule for these statistics, and all other Insolvency Service statistics, can be found on the UK National Statistics Publication Hub.

Comparability and Coherence: Comparability is the degree to which data can be compared over time and domain. Coherence is the degree to which data are derived from different sources or methods, but refer to the same topic, are similar.

The Insolvency Service also publishes monthly insolvency statistics. The sum of these quarterly statistics may not equal previously published monthly statistics since the data were extracted at different times from live administrative systems which are subject to amendments. Companies House also perform additional validation checks on the quarterly data.

Companies House produces official statistics on companies in liquidation and in dissolution. However, these figures do not align with the insolvency statistics, since they include companies that wound up voluntarily.

The Gazette (formally the combination of three publications: The London Gazette, The Belfast Gazette and The Edinburgh Gazette) is an official journal of record consisting of statutory notices, including company insolvency notices. The timings of the publication of Gazette notices and the registration of company insolvencies at Companies House may differ and therefore the numbers of insolvencies in a specified time period may not align. Additionally, it is only a legal requirement for certain insolvency procedures to be published in the Gazette. Notifications of company CVAs are not published. In terms of personal insolvency, only notifications of bankruptcies are published.

The Office for National Statistics also produces annual statistics on business “deaths” in its Business Demography publication. Again, figures do not align with Insolvency Service statistics as they relate to all registered businesses, whereas the insolvency statistics relate only to companies on the Companies House register, and business deaths include all types of dissolution in addition to insolvencies

The AiB is required to be notified of all company liquidations and receiverships in Scotland, and publishes official statistics based on its own administrative records. These differ from the Insolvency Service statistics, which use data from Companies House as the source. Differences are due to the AiB using its own administrative system’s date rather than the date of registration at Companies House. The AiB does not publish information on the number of company voluntary arrangements or administrations, which are a reserved matter for the UK government.

Accessibility and Clarity: Accessibility is the ease with which users are able to access the data, also reflecting the format in which the data are available and the availability of supporting information. Clarity refers to the quality and sufficiency of metadata, illustrations and accompanying advice.

Insolvency Statistics are available free of charge to the end user on the Publication Hub and they meet the standards required under the Code of Practice for Official Statistics.

The accompanying data tables are formatted in line with current guidance for producers of official statistics to help improve the usability, accessibility and machine readability of spreadsheets. The Government Statistical Service are continuing to review this guidance and so the presentation of these statistics may change in the future.

Historical insolvency data are also published for the key series, on the National Archives website.

Views on the clarity of the publication are welcomed via email: statistics@insolvency.gov.uk.