Lee Manning comments on Q1 2012 Insolvency Statistics
Increase in corporate insolvencies
“Today’s modest increase in corporate insolvencies comes shortly after the UK’s official dip into recession. We have seen an increase in liquidations of 0.2% on the previous quarter and 4.3% on the same period last year. This may seem like bad news but the fact is, if economic recovery is going to happen, then some unviable businesses must be allowed to fail to allow others to thrive.
“What is still clear, however, is that insolvency numbers are historically low compared to previous recessions and we have not seen volume of business failures that one would expect. R3’s latest Business Distress Index found that 37% of businesses say they have seen a reduction in sales volumes and 36% say they are experiencing decreased profits, both up on the previous quarter. This indicates that corporate insolvencies may well rise.
Decrease in personal insolvencies
“The decrease we have seen today in personal insolvencies seems like good news but unfortunately may not paint an accurate picture of the personal debt landscape - personal insolvency figures are still high compared to their peak in 2004. There has been a decrease of 4.7% in individual insolvencies compared to the same period a year ago, and a significant fall in the number of bankruptcies, which are down 27.2% on the year – this may well be because people are going into informal Debt Management Plans (DMPs) instead. Worryingly, there are no official figures of how many people are in DMPs but recent R3 research found that there are some 2 million people who say they are in a DMP and there will be many more who are struggling with no help at all.
“Furthermore, R3’s latest Personal Debt Snapshot found that 39% of individuals are worried about their current level of debt – this equates to 18 million adults in the UK. However, only 1.4 million people are likely to seek advice in the next six months. Nearly a third (32%) think their financial situation will worsen in the next six months, as people struggle with rising basic living costs.
“We know that there are also a number of ‘zombie debtors’ out there who are paying the interest on their debts but not able to reduce the debts themselves. This is not a sensible way to manage personal finances in the long term and unless they seek help, we can expect personal insolvencies to rise.”
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Notes to editors:
R3 is the trade body for Insolvency Professionals, and is made up of 97% of the UK’s Insolvency Practitioners from all over the UK.
R3 comments on a wide variety of personal and corporate insolvency issues. Please contact the press office, or see www.r3.org.uk for further information.
R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by one of nine recognised professional bodies.
R3 stands for ‘Rescue, Recovery, and Renewal’ and is also known as the Association of Business Recovery Professionals.
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