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The latest Insolvency Statistics released on 6 May showed that although fewer individuals were declared insolvent in the first three months of 2011, the number of businesses going bust increased by almost 4% to 4,121.
The reduction in personal insolvencies is significant as the first quarter of the year is traditionally one of the busiest for Insolvency Practitioners dealing with personal debt, as people start to face up to the first credit card bills post Christmas, as well as the winter fuel bills. The most significant reduction was in the number of bankruptcies which fell 31.3% on the same period a year earlier. Likewise the number of Individual Voluntary Agreements (IVAs) fell to 10,835, down 8% over the same period.
Commenting on the statistics, Andrew Bland of Stockport Insolvency Practitioners DMC Corporate Services said, “We are not out of the woods yet. The reduction is most likely to be due to people adapting and being careful with their cash. However, moving forward this will be difficult with ever increasing fuel prices, tax rises and for those not on fixed rate mortgages, when the anticipated interest rate rises start to bite. There are many more people who are struggling, who are not in formal insolvency procedures and are either in debt management plans, or robbing Peter to pay Paul and trying to manage their debts themselves.”
On the business side, the picture is worse. There had been a worrying increase in bankruptcy orders for the self-employed to 18.9% in the fourth quarter of 2010, compared to 13% in the last quarter of 2009.
Andrew Bland added, “These individuals are affected by fuel, tax, interest rates and inflation in both their business and personal affairs which are effectively all in one-pot, resulting in them struggling increasingly”.
Furthermore, the increase in liquidations indicated that smaller businesses are still struggling, and the economy is still very fragile indeed.
Roger Hinchliffe who heads Pearson Hinchliffe Commercial Law's Corporate Insolveny service commented that, “Many businesses will suffer because of interest and inflationary pressures over the coming year. However they don’t have to fail as long as the stakeholders can work out a way to act quickly enough to save them in time." Roger added that "in situations where survival is unlikely, Directors can take measures against potential personal liabilities. It is crucial that anyone facing difficulties doesn't bury their head in the sand but instead seeks professional advice as soon as possible. I anticipate more individuals and businesses approaching us for corporate recovery and insolvency advice during 2011.”
To speak to us about a personnal insolvency or corporate recovery situation, contact a Corporate Recovery team member using the details provided below.
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