Record numbers of people were declared insolvent in England and Wales last year, figures showed today.
An all-time high of 135,089 people were declared insolvent in 2010, the Insolvency Service revealed – 0.7% up on the total for 2009.
The record was reached despite a 13.6% drop year-on-year in individual insolvencies to 30,729 for the final three months of the year, as the improving economic situation began to take hold.
The figures follow a warning that numbers plunged into insolvency this year will only grow to new records as families are hit by the Government’s austerity drive. Around 140,000 adults will be made bankrupt, or forced into another type of personal insolvency, equal to 385 per day, said accountancy firm RSM Tenon.
Mark Sands, of RSM Tenon, said: ‘The UK will see the highest levels of personal insolvencies on record as the Government’s austerity measures start to bite.
James Falla, senior debt expert at Beat My Debt agrees. “Despite these latest figures, we are certainly not out of the woods yet in terms of personal debt problems. Really the full force of the government cuts have yet to be felt and as prices continue to rise, more and more people will start to struggle. With interest rates also likely to go up many people will be facing some very significant problems ahead” he warned.
Many remain at risk
Howard Archer of IHS Global Insight said the fourth-quarter decline was ‘obviously good news, but the reality is that many people remain at risk’.
‘Furthermore, any rise in interest rates would be liable to send a significant number of financially stretched people over the edge. There is now a very real likelihood that the Bank of England will raise interest rates sooner rather than later to counter rising inflation.’
Personal insolvencies have now fallen consistently quarter on quarter since the beginning of 2010.
Better situation for companies
Today’s figures also showed further improvements in company liquidations across England and Wales, which fell 15.9% in 2010 to 16,045.
But in a worrying sign for UK businesses, company administrations – often seen as a more representative measure – rose quarter on quarter for the first time since the height of the financial crisis.
There was also caution over the outlook for personal insolvencies, despite the recent improving trend.
Chris Nutting, Director of Personal Insolvency at KPMG warned that there is ‘still an increase in the overall number of people entering into a formal personal insolvency procedure’.
‘Our research shows that creditors are losing a staggering £20m a day from insolvencies. These losses are bound to affect new lending decisions and the cost of new credit.’
