Personal insolvency rates worst ever

UK personal insolvency levels have reached an all time high, with the period
July to September the worst ever – and the situation can only get deteriorate,
says the head of personal insolvency at KMPG.

According to the DTI’s insolvency service personal insolvency rates to the
year to 30 Sep 2005 reached a record 43,606 bankruptcies and 16,496 Individual
Voluntary Arrangements, a common alternative to bankruptcy.

The period July to September was the worst quarter on record, with an
increase to 12,043 bankruptcies, up 6% on the previous quarter and 31% up on the
same period last year. IVAs were up a huge 95% on 2004 and saw a 26% quarter on
quarter rise.

Steve Treharne, head of personal insolvency at KPMG said: ‘These figures are
only going to get worse in the UK. Not only do we have a continuing consumer
debt crisis and significantly greater leniency around reduced discharge terms
brought about by the Enterprise Act but we could also see a number of new
streamlined procedures if current proposals are implemented.’

KPMG found that the average bankruptcy term in the UK is now just eight
months, with 51% of bankrupts being discharged in less than a year. Prior to the
introduction of the Enterprise Act, the average bankruptcy term was more than
three years.

In business terms, the retail industry is experiencing the most liquidations,
with a 17.5% rise year on year, while the services sector saw a rise of 10.8%.

Lee Manning, partner in reorganisation services at Deloitte said: ‘The
figures confirm that the sectors hardest hit are those exposed to discretionary
spending. There will undoubtedly be further pressure on retail and leisure
industries over coming months, and we expect to see a further rise in failures
in these sectors.

‘Managers of businesses in these sectors should seek advice before it is too
late – insolvency in many cases can be prevented with careful working capital
management and negotiation with creditors, in particular landlords who are one
of first to feel the financial impact of a retail slowdown.’

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