Personal bankruptcy falls, but more companies facing liquidation

The number of people declared insolvent in England and Wales fell to its lowest level for more than two years during the first quarter of 2011.

A total of 30,162 people were declared bankrupt or took out an individual voluntary arrangement (IVA) or debt relief orders during the three months, the lowest level since the final quarter of 2008 and the fourth consecutive quarterly fall, the Insolvency Service said.

But in a worrying sign for UK businesses, company liquidations increased by nearly four per cent to 4,121, on a seasonally-adjusted basis, while company administrations, often seen as a more representative measure, rose for the second consecutive quarter to 782.

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Bev Budsworth, managing director of debt management company The Debt Advisor, said: “Levels of personal insolvencies have been reducing throughout 2010, but I believe that we may be on the verge of seeing levels rise again to around 130,000 by the end of this year – quadrupling the levels we saw a decade ago – as the Government’s austerity measures start to bite.”

She added that with Britons collectively owing more than £1.453 trillion, debt problems were an issue that was not going to go away.

Louise Brittain, personal insolvency spokeswoman for Deloitte, said: “The economy as a whole still remains fragile with households feeling the squeeze from high inflation, tax rises and the prospect of job losses. We cannot count on this positive trend continuing as the year goes on.”

There was also concern that the number of firms that had gone into administration had soared by 22 per cent since the final quarter of 2010, at a time when the country was coming out of recession.

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Mike Jervis, partner at PricewaterhouseCoopers’ business recovery services, said: “The significant increase in insolvencies, particularly administrations, in the first quarter of 2011 is unwelcome news.”

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