Experts fear insolvency surge despite drop
Experts are wary of a drop in both personal and corporate insolvencies revealed by figures released by the Department of Trade and Industry today, fearing that the figures could be set to rocket.
First quarter figures show a 2.2% drop in corporate insolvencies compared to the fourth quarter of 2001, but a 1.5% increase on the same period last year.
Although overall personal insolvencies dropped, over 500 more people were declared bankrupt compared to the fourth quarter of 2001.
And insolvency experts fear bankruptcies are set to rocket. With the Enterprise Bill reducing the stigma of bankruptcy, and a rise in house prices and unemployment, upcoming statistics could be different.
PricewaterhouseCoopers partner Patrick Boyden said: ‘By reducing the stigma of bankruptcy, we might be encouraging people to take the wrong sort of risk.
‘Warnings should be heeded from America, where a more friendly attitude towards consumer debt has led to a bankruptcy rate which is about ten times the rate in the UK in relation to population.’
And corporate insolvency figures may not be altogther accurate, as previously revealed in Accountancy Age.
KPMG partner Roger Oldfield said the drop in corporate insolvencies were skewed in the fourth quarter by the administration figures were artificially inflated by Federal Mogul, so the comparison would be difficult.
But he warned of hidden drops in certain sectors. ‘Figures show the economy is in a reasonable state but there are sharp drops in certain sectors, particularly in the telecoms sector.’