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Insolvencies fall - but economic difficulties remain

The total number of individuals entering insolvency has fallen, but this decline does not reflect the financial difficulties being felt by households across the UK.

The Q1 2012 personal insolvency statistics indicate that insolvencies have fallen by 5% on the same period in 2011, but this was still lower than figures registered in Q4 2011, which still 5% than the latest statistics.

Small businesses are likely to make up a significant percentage of this increase, as suppliers to these businesses are unable to provide or extend credit. In Q4 of 2011, one in every fine bankruptcy orders involved trading debts, a significant increase on previous years.

Neil Matthews, restructuring services director at Deloitte believes that the news that the UK had gone into double-dip will add a further blow to economic confidence.

He commented: “The number of people entering individual voluntary arrangements (IVA) fell by 10% to 11,694 from 13,047 in Q4 2011.

“This is due to a large number of individuals simply not having the assets to offer their creditors.

The results also show that more than half (51%) of people feel pessimistic about their household’s disposable income, a slight increase on 49% in the last quarter.

He continued: “With price inflation continuing to outstrip wage inflation, household budgets will continue to be squeezed.

“The decision by several mortgage lenders to tighten their lending criteria will put added financial pressure on homeowners.”

Matthews now believes that the economy will remain fragile, as businesses and consumers alike weather the economic strain.

He added: “with households and business owners alike feeling the pressure from tightened lending conditions, tax rises and the prospect of job losses, we cannot count on the decline in personal insolvency figures continuing as the year goes on.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .