Business

Bankruptcies and corporate liquidations are falling

Notes in a wallet

Fewer people went bankrupt and fewer companies went bust in England and Wales in recent months - but experts caution that the improvement could be short-lived.

The Insolvency Service said there were 33,935 personal insolvencies in the quarter to September, 3.7% fewer than during the same period in 2009.

However, this is still well above levels before the economic downturn.

Just 3,974 firms went into liquidation, down 13.9% on the year.

It was a fall of 2.2% compared to the previous quarter.

Insolvencies are made up of bankruptcies, debt relief orders and individual voluntary arrangements.

The number of individual insolvencies had reached a peak of 35, 682 in the first three months of this year.

'Tip of iceberg'

However, with bank credit remaining tight and the government's austerity measures yet to begin in earnest, analysts warned difficult conditions would persist, particularly for smaller companies.

They said banks and other creditors - including HM Revenue and Customs - had been reluctant to force companies into formal insolvency. But as government cutbacks feed into the economy, or if interest rates were to rise, the trend could worsen again in future.

Research by R3, the trade body of insolvency professionals, suggests that one in five businesses remains worried by debt levels. "Should servicing debt become more expensive, this could trigger more corporate insolvencies," it said. The trade body predicts there could be 27,500 corporate insolvencies next year.

R3 said the official figures on personal insolvencies were only the "tip of the iceberg", with nearly one million individuals believed to be struggling with debt, but not seeking advice, and a further 500,000 taking steps to tackle debt in ways not captured by official data.

Louise Brittain, a partner at accountants Deloitte, said: "The high numbers of people filing for bankruptcy is unfortunately becoming the norm, and whilst today's figures are down... we should not take this drop as a necessary sign of things to come."

In Scotland, about 5,168 people were declared insolvent during the third quarter, slightly down on the previous three months. In Northern Ireland, 551 were unable to keep up with their debts - a 13% drop.

Company liquidations

There was also a significant decline in the number of company administrations, which is often a more representative measure of corporate failures. There were 633 companies in administration - in which an insolvent firm is placed in the hands of administrators and managed with the hope of it continuing as a going concern - across England and Wales during the third quarter, a 35% year-on-year decline.

There were also falls in company liquidations in other areas of the UK, with the numbers dropping by 82% year-on-year to 224 in Scotland and by 55% to 79 in Northern Ireland.

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