Insolvencies rise as downturn bites
Insolvencies in 2002 have risen more than 10%, the Department of Trade and Trade and Industry has revealed, illustrating the extent of the current economic downturn in the UK.
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The DTI’s insolvency statistics show a total of 12,240 personal and corporate insolvencies in the fourth quarter of 2002 compared to 11,104 at the same time last year.
Company insolvencies rose the most on a year-on-year basis. In the fourth quarter of 2002, 4,323 companies went to the wall in England and Wales, rising almost 15% from the same period in 2001. Corporate insolvencies rose 11.1% compared to the third quarter, which had seen some recovery after the sharp jump the second quarter.
The fourth quarter saw 7,917 individuals go insolvent. This is a 7.8% rise compared to last year’s figure of 7,342. But unlike in the corporate world, individual insolvency rates rose steadily.
According to PricewaterhouseCoopers, mid-market companies have been particularly hit by the rise in company insolvencies as a raft of major corporate restructurings and profits warnings squeezed suppliers and trade partners.
In contrast the number of companies entering receivership fell by 21% in the fourth quarter 2002 compared to the same period a year ago. This reflects the established rescue culture among the UK clearing banks which increasingly favour rescue and rehabilitation of larger companies rather than formal insolvency.