06.08.201008:29:00UTC+00England & Wales Q2 Personal Insolvencies Rise

Individual insolvencies in England and Wales rose an unadjusted 5% year-on-year during the second quarter, the government's Insolvency Service said Friday.

The number of individual insolvencies for the period totaled 34,743 compared to a record 35,682 in the first three months of the year. The figure is at its lowest since the second quarter of 2009.

However, personal insolvencies were down 2.6% from the first quarter. It was the first decline since the final three months of 2007.

"The fall in the number of individual insolvencies in the second quarter of 2010 has clearly been helped by gradual but ongoing economic recovery since the economy exited recession in the fourth quarter of 2009 and falling unemployment," IHS Global Insight economist Howard Archer said. "Nevertheless, individual insolvencies are still at a high level and many people remain at risk, particularly if the recovery falters."

The economist further warned that any rise in interest rates would be liable to send a significant number of financially stretched people over the edge. However, interest rates are unlikely to rise for many months to come, he added.

Yesterday, the Bank of England left its key interest rate unchanged at a historic low of 0.5% and maintained the size of the quantitative easing at GBP 200 billion. Preliminary estimates from the Office for National Statistics has shown that the British economy expanded by 1.1% in the second quarter.

Personal insolvencies consisted of 14,982 bankruptcies during the second quarter, down 20.6% from last year and 13,466 Individual Voluntary Arrangements, up 10.2% from a year ago. There were 6,295 Debt Relief Orders for the period.

Compulsory liquidations and creditors' voluntary liquidations totaled a seasonally adjusted 4,080 during the second quarter, up 0.5% on the previous three months. However, the figure declined 19.1% from the same period a year ago.

These were made up of 1,169 compulsory liquidations, down 9.9% on the previous quarter and 21% less than last year. Further, there were 2,911 creditors voluntary liquidations, up 5.4% on the previous quarter and down 18.3% on the corresponding quarter of the previous year.

Firms going into insolvency were 1,311 in the second quarter, comprising 302 receiverships, 777 administrations and 232 company voluntary arrangements. Combining the three, the figure showed a 14.3% decline from last year. Administrations declined 24.3% year-on-year.

"This is a welcome trend in the number of business failures, but the UK economy is not out of the woods yet," commented Malcolm Shierson, who is a partner at the accountancy firm Grant Thornton. "We expect to see an increase in business failures in outsourcing, as well as the hotel and leisure services sectors." The weak performance of the services sector over recent months is a real cause of concern, he noted, coming before the full impact of the reductions in government spending and the impending value added tax rise.

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