Record numbers going bankrupt

May 1 2009

Official figures are expected to show that a record number of people went bankrupt during the first quarter of the year.

KPMG predicts that the Insolvency Service will say 18,500 people in England and Wales were made bankrupt during the the three months to the end of March, up from 18,004 during the previous quarter - itself a record.

The number of bankruptcies, on a non-seasonally adjusted basis, has risen during each of the past four quarters, and the trend is expected to continue this year as the economic downturn takes its toll.

Mark Sands, director of personal insolvency at KPMG, said he expected a record 150,000 people to be declared insolvent during 2009, up from a previous high of 107,000 in 2006.

The total number of people declared insolvent includes people who are made bankrupt or take out an individual voluntary arrangement (IVA), under which interest on debt is frozen in exchange for a set amount being repaid each month,

It will also include people who opt for a Debt Relief Order, a new alternative to bankruptcy for people with debts of less than £15,000, which was introduced this month and will be included in statistics from the second quarter.

Pat Boyden, an expert in personal insolvencies from PricewaterhouseCoopers Business Recovery Services, said: "We expect to see the trends continue, particularly the rise in bankruptcies, as the recession bites. What may be interesting is that in the 1990's recession, bankruptcies continued to increase for nearly three years after the worst of the recession had passed. If that is the case this time, we may be seeing record figures every quarter until 2012."

The Insolvency Service figures will also give details on the number of businesses that went into administration during the first quarter.

PwC's said its own analysis suggests 5,483 companies became insolvent in the first three months of the year, 14% more than during the previous quarter and 57% than in the same period of last year.

It said there had been a sharp rise in failures across all sectors, with firms involved in construction, real estate, retail and hospitality and leisure particularly hard hit.