Record number of insolvencies

Author: By Holly Williams, Press Association

A total of 35,242 people became insolvent in the three months to the end of
September – up 7 per cent on the previous quarter and 28 per cent on a year
ago, according to the Insolvency Service.

The number of company liquidations – in which a firm is wound up and its
assets sold off – stood at 4,536 in England and Wales, although the pace of
growth slowed sharply for the second quarter in a row.

Today’s individual insolvency figures were again the highest since records
began in 1960 as the economic woes continued to take their toll.

But there was some hope for an improved picture as the level of
quarter-on-quarter growth slowed slightly from 9% in the three months to
June.

The number of personal bankruptcies – at 18,347 across England and Wales –
also eased by 3% on a quarterly basis, marking a fall for the second
straight quarter.

But this is partly thought to be down to take-up of the Government’s recently
introduced Debt Relief Orders (DRO), which were launched on April 6 as an
alternative to bankruptcy.

Take-up among those eligible for DROs – people with debts of less than
£15,000, assets of less than £300 and less than £50 surplus income a month –
more than doubled to 4,505 in the third quarter.

DRO figures were particularly low initially due to orders taking longer to
process than expected, which led to a backlog that only began to clear in
the third quarter.

The Insolvency Service statistics also revealed that the number of people
taking out an individual voluntary arrangement (IVA), under which interest
on debt is frozen in exchange for a set amount being repaid each month,
leapt by 21% year-on-year to 12,390, again the highest level since the final
quarter of 2006.

Stephen Speed, chief executive of the Insolvency Service, said: “Debt Relief
Orders have provided real help to significant numbers of people on low
incomes, who were overwhelmed by relatively low levels of debt which they
had no way of repaying.”

He added: “Bankruptcies have decreased since last quarter and more people are
seeking debt relief through an IVA – which result in greater return for
creditors and are less distressing for debtors.”

But experts said there should be little comfort drawn from the figures, with
predictions for a grim total figure by the end of the year.

Marks Sands, director of personal insolvency at Tenon Recovery, said: “We have
already exceeded the annual record for personal insolvencies and if this
trend continues we are likely to see levels exceed 130,000 by the end of the
year.

“We expect to see around 150,000 personal insolvencies next year, with record
levels set to stay until 2012.”

Company figures revealed an easing picture for corporate Britain, showing that
firms in administration – often a more representative measure of business
failures – fell 3% year-on-year to 974.

Administrations, where an insolvent firm is placed into the hands of
administrators and managed with the hope of it continuing as a going
concern, have not fallen on an annual basis since the fourth quarter of 2007.

But recent high profile casualties, such as Threshers parent First Quench and
coffee shop chain Coffee Republic, have highlighted the ongoing difficulties
faced by firms amid the recession.

Mike Jervis, partner at PricewaterhouseCoopers, said: “The statistics have
shown a slight decrease quarter on quarter, but they still remain at
unprecedented levels.

“Experience shows that there is spike in the number of businesses going bust
as an economy recovers and companies need to remain obsessively focused on
costs, cash and turnover if they do not want to become one of those
statistics.”

The third quarter Insolvency Service figures also showed 5,767 individuals
were declared insolvent in Scotland in the third quarter, down 4% on a year
earlier, while there were 381 individual insolvencies in Northern Ireland, a
1.3% annual decrease.

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