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The number of people becoming insolvent rose by 25 per cent in the last three months of 2009, with numbers for the full year far outstripping the pattern seen during the recession of the early 1990s.
According to official data from the Insolvency Service, a division of the Department for Business, Innovation and Skills, the number of insolvent individuals in England and Wales is now 134,142 or one in every 320 adults. In the fourth quarter of last year alone, there were 35,574 individual insolvencies, up 24.9 per cent from the last three months of 2008.
The latest numbers suggest that the improvement in the economy seen towards the end of last year is slowing the rate at which personal insolvencies are rising. Bankruptcies rose by 0.9 per cent between the third and fourth quarters of 2009. This was down from rises of 6.6 per cent and 9.3 per cent respectively in the second and first quarters.
Most personal insolvencies – more than 85 per cent – were made at the request of the individual rather than by creditors, suggesting lenders are not rushing to put borrowers into bankruptcy. There were 5,348 debt relief orders, a new legal status aimed at those with no homes or other significant assets and almost no incomes.
Alec Pillmoor, head of personal insolvency at Baker Tilly, said: “Whilst the recent unemployment statistics have been more favourable, many families are finding it difficult to manage their finances with reduced hours of work. Our major concern is for 2010 as the predicted increase in interest rates and reductions in public sector spending may result in even more individuals entering insolvency.”
There was better news with regard to businesses, however, with company liquidations totalling 4,566, down 1.7 per cent from the third quarter of 2009 and down 1.1 per cent from the fourth quarter of 2008.
Among other forms of corporate insolvencies, receiverships in the fourth quarter of 2009 totalled 397, down from 410 in the third quarter but up 53.1 per cent from those in the fourth quarter of 2008. Administrations, however, continued to fall quarter on quarter through 2009 and in the fourth quarter, at 849, stood 58 per cent below the level seen in the same period the year before.
Graham Rusling, managing director of Barclays Business Support and Recoveries, said: “Despite the overall fall in corporate insolvencies the number of business failures during 2010 is likely to remain high, leading to greater and more sophisticated efforts by the banks to keep companies trading, more than during any previous recession.”
Indeed, the Insolvency Service’s own data show that the level of corporate liquidations was far lower in 2009 than it had been during the last recession in the years 1991-93.
“This focus has kept corporate insolvencies lower than predicted in 2009, which we see in today’s figures, and will continue well into the recovery, particularly as the ‘insolvency lag’ experienced in previous recessions means insolvencies will not drop away to historic levels until some time after economic growth returns.” Mr Rusling said.