Partner Article

Insolvency still on the rise

Figures out today show that a total of 1,310 companies became insolvent in England and Wales in the second quarter of 2012.

The number of firms who are unable to repay their debts has gone up by 1.3% from the first quarter of the year. The statistics from The Insolvency Service demonstrate an overall increase of 6.3% from this time last year.

Retailers in particular are being hit hard as a dramatic number of these businesses go into administration. The number of shops entering administration is up from 38 appointments in the second quarter of 2011, to 52 appointments in the same period in 2012.

Mark Firmin, KPMG’s North based UK regional Head of Restructuring, commented: “This figure is an indication of how retail health has declined over the last year.

“The sector remains under significant pressure from reduced consumer spending, rising overheads and low confidence.

“We have seen many retailers resort to slashing prices to try to encourage spending, but the long term effect of this discounting strategy will see them weakened even further. Price cutting may be a short term survival strategy, but it doesn’t tackle the underlying problems facing the sector.”

Although insolvency is rising, the number of corporate liquidations has decreased by 3.6% from the previous quarter.

The second quarter in 2011 also had a higher rate of companies going into liquidation as these new statistics show a 2.4% decrease from this period.

Individual insolvencies tell a similar tale withthe figure remaining high at 27,390 individuals in the second quarter, although this is a decrease of 10.2% from the same period last year.

Louise Brittain, partner in Deloitte’s Contentious Insolvency team, said: “While these figures are a decrease on the same period last year, they are still exceptionally high and show that every day about 300 people become insolvent.

“Although insolvency levels have fallen over the past 12 months, more than 100,000 people are affected each year – a much higher rate than we saw in previous years.

“Figures from debt charities and consumer groups indicate that the total level of personal debt in the UK is about £1.5 trillion and the average amount owed by each adult including mortgages is nearly £30,000. Although inflation is falling to provide some relief to households, the poor state of the economy will see thousands more people become insolvent.”

Image by Ben Osteen

This was posted in Bdaily's Members' News section by Miranda Dobson .