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Monday
Feb102014

Individual insolvencies at lowest for eight years

Government figures show that personal insolvencies in England and Wales fell to their lowest level in 8 years in 2013.

There were 101,049 individual insolvencies in 2013, a fall of 8 per cent from 2012 and the lowest number since 2005. Corporate insolvencies fell by 7.3 per cent from 2012 to 14,982 – the lowest figure since 2007. Both figures are still considerably higher than before the financial crisis.

Although the figures may look positive, the reduction is due in part to the reduction in consumer lending and the low interest rates since the start of the financial downturn.

The Bank of England interest rate has been set at a record low of 0.5 per cent since 2009, and experts warn that we could see an increase in insolvencies when interest rates start to rise again.

"For me, the acid test for personal insolvency will be when the Bank of England starts to raise interest rates and people's mortgage payments follow suit," said Bev Budsworth, managing director of insolvency practitioner Debt Advisor.

A combination of low interest rates and more sympathy from banks over cash flow problems has allowed a lot of businesses to hang on, but this too may change soon.

"Sooner or later, interest rates will rise and bank forbearance will end - and when that happens the weaker firms will be in serious trouble," said David Birne, insolvency partner at chartered accountants HW Fisher.

R3, the trade body for insolvency professionals, has warned that the figures do not show the whole picture. Debt Management Plans, which are new informal debt agreements, have not been included in the numbers.

"Until the government begins to monitor new DMPs, the true scale of personal insolvencies in England and Wales will be hidden," said Giles Frampton, R3's vice president.

"Many people will have done their best to avoid insolvency in the run-up to Christmas, so there will be fallout from that in January and February," he added.

Insolvency can be a complex and distressing process. If you need help in handling these matters in a speedy and professional way, contact St Matthew. For more information go to. stmworldwide.com.uk-bankruptcy or stmworldwide.com/company-dissolution  

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