Rate of personal and business insolvencies stabilising

News Article - 12 August 2011
Category: Business

Official figures from The Insolvency Service indicate the number of personal and business insolvencies is beginning to stabilise.

Personal insolvencies in England and Wales rose by just one per cent in Q2 2011 and overall figures have effectively remained flat for the last nine months.

More interestingly, the number of business insolvencies dropped by five per cent in Q2 2011.

Louise Brittain, insolvency partner at accountancy firm Deloitte's, is hopeful the severity of insolvencies had now reached an impasse.

"Whilst insolvencies are still commonplace, we are not seeing the severity that we have seen in recent years.

"Low interest rates have gone a long way in helping individuals to keep their finances at a manageable level."

Despite the levelling out of personal and business insolvencies in recent months, the official figures underplay the true seriousness of the financial situation according to Chris Nutting at accountants KPMG.

"Our own research has found that over-indebtedness is also leading to an increase in the number of households setting up informal arrangements with creditors - such as debt management plans - in an attempt to settle debts.

If you combine informal arrangements with the insolvency figures, there may be as many as 250,000 people a year setting up some form of arrangement with their creditors."

In fact there is great concern that an increasing number of businesses are going out of business without even filing for insolvency - such is the irreversible financial trouble many small and medium-sized enterprises find themselves in at present.

Brian Johnson, of HW Fisher chartered accountants, said: "Last month, data from Companies House revealed that record numbers of firms are going out of business without formally filing for insolvency.

"This tells us that they have been so badly hit that there is no point even carrying out a salvage mission."

Costs alone for filing for bankruptcy stand at £600 - a significant amount for any SME already in dire financial straits. Consequently businesses should carefully monitor their financial reporting with inflation and living costs set to spiral upwards.

Article keywords: The Insolvency Service, Deloitte, KPMG, SME, HW Fisher

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