The second quarter of 2005 has recorded the highest ever number of personal insolvencies in England and Wales (15,394), marking an increase of 11.7 per cent on the previous three months and a staggering 36.8 per cent on the same period last year. Corporate insolvencies are also on the rise, with liquidations reaching their highest level (3,342) since mid-2003.
The latest increase is 12.5 per cent higher than the previous quarter and 6 per cent higher than the same time in 2004, according to the latest statistics published by the DTI today and
analysed by Grant Thornton's Recovery and Reorganisation practice.
"The UK's mountain of personal debt continues to have no peak in sight," said Mike Gerrard, a personal insolvency specialist at Grant Thornton. "The problem rests squarely on excessive credit and store card use, personal loans, and often unsustainable champagne lifestyles," said Gerrard.
"At the half year mark we are standing short of seeing 30,000 personal insolvencies, an equivalent of more than 160 every day. I believe there is every likelihood of more than 60,000 bankruptcies or IVAs before the end of the year, an amount which would be double that of three years ago.To put it into context that's almost like filling Manchester United's Old Trafford," said Gerrard.
"The levels of unsecured debt affecting personal insolvencies are undoubtedly growing," Gerrard continued. "This time last year we were seeing individuals with loans, credit and store card debts in the region of £50,000, whilst this year it's anything in the £50,000 to £100,000 bracket.
"It is clearly not surprising that individual bankruptcies and IVAs are continuing to rise, nor that house repossessions are also becoming more commonplace after lying relatively dormant since the late 1980s and early 1990s," he continued.
"Thursday's cut in interest rates might prove a tonic for the economy but will not make much difference to people with serious levels of debt. A quarter point reduction merely shaves a few pounds off a typical £100,000 mortgage and clearly has a limited effect on credit card repayments with 20
to 30 per cent interest charges," concluded Gerrard.
