Marking the third year of the credit crisis, Insolvency Service has released data that a total of 34, 743 people were declared insolvent during the April, May, and June months combined. This is 5 per cent more than during the same period in 2009. However, the number of insolvencies fell from 35,682 in the first quarter. Second quarter reporting was slightly lower than the previous quarters numbers by 2.6 percent.
KPMG’s insolvency director, Chris Nutting said: “Unfortunately this is likely to be but a temporary reprieve as the broader economic picture suggests a bleak future for a large number of people as they struggle to pay off their debts whilst employment prospects, especially in the public sector, continue to be uncertain.
“The headline interest rates remain low but the stark reality is that, for some people, interest rates on unsecured debt such as credit cards remain high. There only needs to be one small rise in interest rates to push a large number of people into serious financial difficulties.”
Brian Johnson, a HW Fisher and Company insolvency practitioner said: “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.”
The report from Insolvency Service also revealed the number of companies put into administration in second quarter was 4,080 which is a 0.5 per cent increase over the first quarter. This is a decrease from the same period in 2009.
Frances Walker of the Consumer Credit Counselling Service said: “I think we are going to see more people being declared insolvent, and it will especially affect women as there are a lot of women employed in the public sector.
“They are not all high-paid civil servants sitting on a good pension – there are a lot of lower paid people in the public sector as well.”
Louise Brittain, partner in Deloitte’s Contentious Insolvency Group, said: “There are swathes of people struggling with debt and finding themselves in desperate situations.
“This is unlikely to change in the foreseeable future. I fully expect that we will see another rise in the total number of people petitioning for bankruptcy in the second half of the year.”
Brittain forecasts that the number of insolvencies for 2010 will hit the 140,000 mark.