Bankruptcy and insolvency figures make sobering reading
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In some gloomy but significant news, the number of people being declared bankrupt in England and Wales has hit a new record, according to the government’s Insolvency Service.
In the first three months of the year there were a record 19,062 bankruptcies and 10,713 individual voluntary arrangements (IVAs).
There was better news from the business figures, the number of companies going bust in England and Wales fell back in the first three months of the year. However the figures were still 54% higher than a year ago.
Insolvency specialists have predicted that personal insolvencies might rise above 125,000 this year. This reflects both the stresses of high levels of personal debt and rising unemployment and a record number of entrepreneurs going bankrupt on the back of their business’s failure.
In the first quarter of 2009 there were 29,774 personal insolvencies in total, 1.6% up on the previous quarter and 19% up on a year ago.
The annual number of people being declared insolvent was steady during 2006, 2007 and 2008. But the figures started to rise in the middle of last year, reflecting the plunge of the economy into recession.
A personal insolvency expert at KPMG has said the numbers will grow, especially when Debt Relief Orders for people with debts of below £15,000 were taken into account.
Debt Relief Orders were introduced about a month ago and are going to add to these insolvency figures and take them to even higher levels.
One analyst has suggested that when the figures are all put together we shall be faced with record levels of personal insolvency.
In addition to the personal bankruptcies there were also 1,783 corporate insolvencies such as receiverships and administrations in the first three months of the year, 27% fewer than in the last quarter of 2008.
Insolvency specialists warned, however, that this dip was not the start of a new downward trend. “Today’s statistics firmly squash the notion that there are any green shoots of recovery out there.”
Since last autumn many of the companies declaring themselves insolvent have suffered significant drops in turnover that they have been unable to replace. It is difficult to foresee there being a slowdown in the rate of company insolvencies until the middle of next year.
The number of company liquidations in England and Wales, the end stage of the process for companies, saw a continued increase. There were 4,941 compulsory liquidations and creditors’ voluntary liquidations. That was 7.1% more than in the previous three months, and 56% more than a year ago.
This is the sobering news that provides the realistic alternative to those government ministers parroting the clichéd and yet implausible rubbish about green shoots and immediate recovery. It also paints last week’s budget in a darkly comic light.
