Press Releases
07 August 2009
Latest Insolvency Service Statistics understates the true financial difficulties of businesses and individuals
• Banks expected to accelerate business closures after summer holiday
• Credit card delinquencies breach 10% mark for first time since 2001
The latest figures published today by the Insolvency Service reveal that the number of corporate insolvencies in England and Wales has increased by 2.9% in the past three months (up 39% on Q2 2008), to reach 5,055 during the second quarter of 2009.
Individual insolvencies have increased by 9.3% in the past three months (up 27.4% on Q2 2008), to reach 33,073 in the last quarter.
Comments from Anthony Cork, Director, Top 25 accountants Wilkins Kennedy. Tel: 020 7403 1877
“A clearer reflection of the damage to businesses failure lies in the record write-downs in bad corporate debts the banking sector has just announced.”
“A considerable chunk of the £19 billion loss (over the last year) from bad corporate loans, announced by Lloyds Banking Group, will stem from businesses that have not yet entered into insolvency and may not be included in the Insolvency Service figures for quite some time.”
“Pressure from the Government has meant that a lot of banks have been holding off on foreclosing on individuals and restructuring businesses that they have lent to. However, this political pressure is on the wane and intervention led by lenders is expected to accelerate in the autumn.”
“Another indication of the scale of the problem is the £3 billion owed to HMRC in VAT and PAYE payments alone under its “Time to pay” scheme. The scheme has come under fire for encouraging companies to trade whilst insolvent and if this is the case this is simply delaying the inevitable.”
“We expect the number of companies being restructured or wound up to accelerate as the summer holidays end. Businesses have been subjected to a lot of damage over this recession and many won’t survive the losses they have accumulated.”
Rise in credit card delinquencies and unemployment to trigger further increases in personal insolvency
“The latest Moody’s Credit Card Index reveals that delinquencies are rising and have surpassed 10% of all UK credit card lending for the first time since 2001.”
“Credit card delinquencies inevitably lead to more insolvencies as the patience of card issuers is not infinite.”
“Pervious research by Wilkins Kennedy has shown that whilst insolvency has been rising fastest amongst the over 45s in the past five years as a result of an increase in those supporting second families, the finances of the under 24s are now also coming under growing pressure.”
“Unemployment amongst 18-24 year-olds is expected to hit the one million mark next month, with employers tending to freeze recruitment from the bottom rung of the ladder up.”
“Those under 24 year olds who have build up unsecured lending will now struggle to repay those debts without the regular income they had expected to receive.”
“More generally a considerable number of homeowners will have been struggling to pay their mortgage with unemployment benefits as their only source of income for some time now.”
“Those who are still employed but have had their hours cut back or who no longer receive overtime are also likely to be feeling the full weight of their financial obligations.”
Debt Recovery Orders
“Many credit counsellors have been bullish about the appetite for Debt Recovery Orders, which allow borrowers to write off debts of less than £15,000 if they have assets of less than £300 and a monthly disposable income of less than £50. However, these figures would suggest that far too few borrowers fall into this category for this to have had any impact.”
ENDS
Press enquiries:
Anthony Cork
Director
Wilkins Kennedy
Tel: 020 7403 1877
Mobile: 07880 601 962
Keith Stevens
Partner
Wilkins Kennedy
Tel: 01784 435 561
Mobile: 07880 601 961
Jane Lougher or Nick Mattison
Mattison Public Relations
Tel: 020 7645 3636
