Personal insolvencies steady as corporates show signs of distress

Published at 12:29 PM on 01 February 2008

The number of people who became bankrupt or entered into an Individual Voluntary Agreement (IVA) in England and Wales in the fourth quarter of 2007 is 24,846 according to data released today by the Insolvency Service and analysed by PricewaterhouseCoopers LLP. The number of people using IVAs as a tool to deal with overwhelming debt fell for the 4th consecutive quarter, with 9,188 between October and December 2007. However, the new IVA protocol, an agreement between creditors and providers announced earlier this week may result in an increase in IVAs in the coming year. By providing a standardised way of treating assets and liabilities, the new system should serve all parties more efficiently. On an adjusted basis, the number of companies entering insolvency in 2007 fell by 7.9% compared 2006. However, the rate of slowdown was only 3.6% in the last quarter of 2007 compared to the same quarter in 2006, showing that the effects of the credit crunch are beginning to bite. Figures released earlier this month by PricewaterhouseCoopers showed that manufacturing and retail insolvencies fell by 14.8% and 6.4% respectively, when comparing 2007 with 2006. However, the number of insolvencies in the hospitality and leisure sector last year rose with an increase of 22% against 2006 according to PricewaterhouseCoopers figures. There are a number of factors driving the high number of insolvencies in hospitality and leisure including: the smoking ban, increased competition from supermarkets, rising costs and a general slowdown in consumer expenditure. These insolvencies have tended to be at the smaller end of this market. Pat Boyden, partner in the Business Recovery Services practice at PricewaterhouseCoopers LLP, said: “These figures show a marked fall in personal insolvencies, particularly IVAs. For much of last year, over-indebted consumers relied on remortgaging to stave off bankruptcy, but the credit crunch put a spanner in the works as lenders tightened their lending criteria. This has led to the most financially-stretched consumers reverting to more expensive borrowing on credit cards and loans, which may result in rising numbers of personal insolvencies this year.” Mike Jervis, partner in the Business Recovery Services practice at PricewaterhouseCoopers LLP, said: "The overall numbers are down again for 2007; which reflects the sophistication applied by stakeholders in work-out and refinancings, where avoidance of formal insolvency has become the preferred way. Not all sectors are immune, but most have seen drops in total insolvencies. “There were still around 1,300 corporate insolvencies per month on average and the causes of the most recent are largely predictable: over-gearing, drop in consumer demand, pension deficits, fraud - the usual suspects. “Over the last month or so there has been evidence of buyers of underperforming assets or companies struggling to raise debt or equity. Lower levels of confidence mean funders and management are less likely to attempt riskier turnarounds. If stakeholders aren’t willing to take risks with a distressed business, the spiral down will simply get longer, and, of course, more painful." ENDS

Notes to Editors:

The Official Insolvency Statistics for Q4 2007 for England and Wales were released on Friday 1 February 2008. They are the most comprehensive record of the number of insolvencies and bankruptcies available and are derived from administrative records of the DTI Insolvency Service and Companies House Executive Agencies. 

For more information contact:

Stephanie Howel
Advisory PR Manager, PwC 
Tel:020 7213 2421 
Mobile:07734 456 098 

Patrick Boyden
Partner, PricewaterhouseCoopers LLP 
Tel:0121 265 5072 


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