Record insolvencies just the tip of the debt iceberg
The latest insolvency figures, showing record insolvencies in 2009, are just the tip of the personal debt iceberg, according to insolvency trade body R3.
R3's research released today indicates that an additional one million individuals (916,000) are struggling with debts without seeking help.
As the Government's latest 2009 statistics shows a 26 per cent increase in personal insolvencies from 2008, R3 President Peter Sargent says, "Even these record personal insolvencies are just the tip of a very worrying personal debt iceberg. What lies below the waterline is a much larger group who are sadly not facing up to their debt problems."
R3's research indicates that around one million people are struggling without seeking help, and a further half a million (574,000) have contacted their creditors informally for help after struggling with their debts. All in all, the number of people experiencing financial difficulty is estimated to be around seven times the number of people in formal insolvency.
Commenting on the formal insolvency statistics out today, Peter Sargent said: "We know from previous recessions that early recovery can be a dangerous time - insolvencies continue to rise even after a recession ends. We are predicting 127,191 personal insolvencies in England and Wales for 2010."
Commenting on corporate insolvency, R3 President Peter Sargent said: "The latest insolvency figures for the fourth quarter of 2009 are significantly below expectations for corporate insolvency for this point in this recession, measuring a 1.7 per cent decrease on the previous quarter. However, we should not take this is as a sign that the worst is over. The last few months of 2009 were relatively quiet for Insolvency Practitioners as the Government's ‘Time to pay' scheme kept some businesses away from insolvency and banks broadly continued to lend their support.
"We know from previous recessions that, although the overall economic outlook is brighter, this is the most dangerous time for businesses as creditors attempt to collect money owed and policy makers cut measures aimed at helping those in financial trouble. The MPC's decision to hold interest rates at 0.5 per cent suggest they recognise the risk of a double-dip recession.
"Our members have identified an ‘insolvency lag' which shows it can be years after recovery starts that insolvency figures level off. We expect 28,000 corporate insolvencies this year in the UK, although only a slight increase from 2009 is still a 22.8 per cent jump on the figures for 2008 (22,792). We are also predicting 154,000 personal insolvencies for 2010, a 22.2 per cent increase on 2008 (128,046)."