Bankruptcies rise 23.4% as insolvencies hit highest level ever

Friday, 01 May 2009 10:09

Personal bankruptcies have risen 23.4 per cent on a year ago, new figures reveal.

Insolvency Service data for the first quarter of 2009 reveal 19,062 bankruptcies and 10,713 individual voluntary arrangements (IVAs) in England & Wales.

The total number of individual insolvencies - now at the highest level since records started in 1960 - rose 1.6 per cent from the last quarter of 2008 and is up 19.0 per cent on the first quarter of last year.

Scotland saw 5,693 individual insolvencies - up 71 per cent on a year before - while insolvencies in Northern Ireland rose 39 per cent to 458.

Alan Tomlinson, at insolvency practitioners Tomlinsons, explained the rise in bankruptcies was not so surprising - as people move away from structured debt management plans such as IVAs.

"Debtors are experiencing a vicious backlash from the days of easy credit," he said.

"Compared to this time last year, more and more people are opting for the bankruptcy route rather than committing themselves to extended repayments though an IVA. I do not expect the number of personal insolvencies to fall for some considerable time yet."

He added the main warning signs for those starting to struggle financially included: falling behind with your mortgage; increasingly having to live off a credit card to make ends meet; having to take credit from parties that you would not normally take credit from; and, borrowing money from family or friends to pay pressing creditors.

The Insolvency Service data for companies show a 56 per cent rise in firms going to the wall.

A total 4,941 liquidations were recorded, while 316 firms went into receivership, and 1,311 went into administration.

Richard Fleming, UK head of restructuring at KPMG, said: "The jump of over 50 per cent on last year's figures, and nearly 12 per cent up on last quarter, is a staggering reminder of how quickly the recession has knocked down many businesses in its path."

he noted a particular rise for wholesale and retail sectors, while manufacturing accounted for a large number of all insolvencies and construction continues to suffer.

"Unfortunately we are seeing companies with nowhere else to go failing as their backers, realising that they are throwing good money after bad, snap the purse closed," he said.

"The financial sticking plasters which were applied to struggling companies when liquidity was still available are now coming away and lenders are unwilling to reapply them."

Mr Fleming added: "We expect to see the rate of insolvencies gathering pace over the coming months as the Darwinian theory takes effect in the corporate world."

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