The official statistics come from The Insolvency Service and have raised concern that many people’s finances are still balanced on a knife edge.
The personal insolvencies included 14,982 bankruptcies, down 20.6% on the corresponding quarter of the previous year; 13,466 Individual Voluntary Arrangements (IVAs), which were up 10.2% on the corresponding quarter of the previous year; and 6,295 Debt Relief Orders (DROs).
Brian Johnson, an insolvency practitioner at HW Fisher & Company chartered accountants, said: "It's encouraging to see that bankruptcies are down, but don't be misled by this. The fact that both DROs and IVAs are still creeping up shows that we are not in the clear yet.
"Many consumers are still highly stretched financially and public sector spending cuts are only going to make things worse over the course of the next two years. The feeling among insolvency practitioners is that this is the lull before the storm.
"The smaller first wave of more extreme cases may be behind us but the larger second wave of the mass of people who are still in a perilous condition financially is now approaching."
Tim Moss, head of loans and debt at moneysupermarket.com added: “On paper this looks like great news, however I'm inclined to see this as the calm before the storm. Many people are just about making ends meet due to the low Bank of England interest rates keeping the cost of mortgages down.
“However, the only way base rate can really go is up, and when this happens we could see many households tip over the edge as a result. With job losses in the public sector, VAT rises in January and the cost of living increasing, we may see many households plunge into further difficulties so although we should welcome the drop in insolvencies, we shouldn't assume we are out of the worst of it."
And Steven Law, President of R3 the insolvency trade body, agreed: "The fall-out from the recession is still with us as today's personal insolvency figures are running at 5% higher than last year, totalling 34,743 individuals in the second quarter.
"Unfortunately, the personal insolvency figures are just the tip of the ‘debt iceberg'. The true size of the UK's debt problem remains hidden as insolvency industry estimates there are an additional 500,000 people currently in informal debt management plans and close to a million people are struggling with their debts and have not yet sought help.
"With major cuts in public spending now taking effect, these numbers are almost certain to rise still further, and for many of those affected, it might well be the first time they've had to deal with serious financial problems. The sooner someone seeks advice the more options they will have available to them."
Corporate Insolvencies
The Insolvency Service also reported on company insolvencies today, revealing there were 4,080 compulsory liquidations and creditors' voluntary liquidations in total in England and Wales in the second quarter of 2010 on a seasonally adjusted basis.
This was an increase of 0.5% on the previous quarter and a decrease of 19.1% on the same period a year ago. The total included 1,169 compulsory liquidations, down 9.9% on the previous quarter and down 21.0% on the corresponding quarter of the previous year; and 2,911 creditors voluntary liquidations, up 5.4% on the previous quarter and down 18.3% on the corresponding quarter of the previous year.
In the twelve months ending Q2 2010, approximately one in 127 active companies (or 0.8%) went into liquidation, which is a slight decrease from the previous quarter, when this figure stood at one in 120.
Brian Johnson said the figures indicated that Britain's businesses are limping on like a wounded army in retreat. “Although the main of the army is intact,” he said. “It is losing people along the way.”
He added: "It is still difficult to see how we are going to get out of the rut that we are in, as many companies still cannot get the finance they need to survive. The fact that the banks are returning good numbers and improving their balance sheets will count against struggling companies rather than benefit them. Once banks are more confident, they will more readily remove funding on businesses they do not feel to be viable.
"We expect the number of corporate insolvencies to be far higher in the fourth quarter and to continue rising into 2011."
Steven Law also said he expected to see further rises in the number of companies going bust towards the end of the year.
He said: “We would expect corporate insolvencies to rise after a recession as they did in previous recessions, but the figures only show a 0.5% increase in company liquidations from the last quarter. We suspect these increases in corporate insolvency may not show until the end of this year or next.
"This is due to factors that are unique to this recession: HMRC's Time to Pay scheme, which allows struggling businesses to defer their tax payments, has been extremely successful in keeping businesses alive - there is currently £5.13bn of tax delayed under this scheme; and historically low interest rates has kept the cost of servicing debt relatively cheap.
"The early stages of recovery are typically a challenging time for businesses as creditors begin to be more aggressive in their debt collection, but, from what I am seeing, creditors are being more lenient than in previous recessions. If you ask two experts their predictions for the future you are likely to get two very different answers, but we can expect to see a rise in corporate insolvencies when interest rates rise and as the Time to Pay facility becomes squeezed."
