Record number of bankruptcies expected in UK

Insolvency figures released today in the UK are expected to show that a record number of people went bankrupt during the second quarter of the year.

Accountancy firm KPMG is predicting the official statistics will show 30,500 people went bankrupt or took out an Individual Voluntary Arrangement (IVA) during the three months to the end of June, 14% more than during the same quarter the previous year.

Within this total it is expecting the number of people declaring themselves bankrupt to rise to 20,000, up from 16,842 during the first three months of the year.

But it added that the number of people taking out IVAs is likely to fall, dropping by 7% quarter-on-quarter to 10,500.

Overall the group said it expected there to be a total of 116,363 people declaring themselves insolvent during the year to the end of June, 32% more than during the previous 12 months.

It added that it expects a record number of people to go bust during 2007.

Mark Sands, director of personal insolvency at KPMG, said: “The number of IVAs will be down because there has been a lot of problems with different stakeholders concerned about whether IVAs are appropriate for different consumers. But we think it will go up in the long-term.”

Debt charity the Consumer Credit Counselling Service is also expecting there to be a rise in bankruptcies but a fall in the number of people taking out IVAs.

CCCS chairman Malcolm Hurlston said: “There is little doubt that IVAs will be down, reflecting the increasing dissatisfaction of creditors with the for-profit IVA sector.

“Bankruptcies are likely to be up and calls to CCCS helplines are up, which suggests that people are contacting us earlier when financial counselling can resolve their problems.”

Pat Boyden, of PricewaterhouseCoopers Business Recovery Services, said: “It is difficult to predict. I think numbers will be similar to last quarter in total, there may be an increase.”

He said increasing interest rates, fuel prices, utility bills, and the personal rate of inflation would all be putting people under pressure, but the impact of this was likely to filter through in the next few months, rather than in today’s figures.