New Personal And Business Figures Released
An insolvency expert at Irwin Mitchell has warned that new insolvency stats could prove to be the “calm before the storm” for many businesses.
New figures from the Insolvency Service revealed that while the number of personal insolvencies in England and Wales fell by more than 11 per cent in 2011 when compared to 12 months earlier, the number of companies facing problems rose by 1.3 per cent.
Discussing the issues, Andrew Walker, chair of R3 in Yorkshire and partner at Irwin Mitchell, said: “The increase in corporate insolvencies is unsurprising given the challenging economic environment that businesses are operating in. We have known for a while that many businesses are surviving but not thriving, operating as ‘zombies’ and eventually some would have to fail.
“What is still clear however is that insolvency numbers are historically low compared to previous recessions and we have not seen volume of business failures that one would expect. This is certainly the calm before the storm and in fact if the economy is to recover, we must see some businesses fail, to allow viable ones to thrive.
“2012 is set to be a very difficult year and recent research by R3 indicates that SMEs, which are vital to the economic recovery, are going to need more support. In the final quarter of 2011, 29% of SMEs were experiencing a reduction on sales volumes, compared to only 6% of large businesses.”
Commenting on personal insolvencies, he added: “The decrease in personal insolvencies does not necessarily indicate that individuals are better at dealing with their personal finances. Research carried out by R3 in November 2011 found that these individuals are able to stave of formal insolvency by servicing their debt, but not actually reducing it (16%). This indicates that many people are just hanging on, but with wages remaining stagnant and utility bills rising, many will not be able to cope for much longer.
“Furthermore, what the official figures do not show are the number of people in informal debt procedures. We estimate that some 500,000 are in a Debt Management Plan and there are many more who are struggling without any help at all.
“We have every reason to believe that 2012 is going to be tougher than 2011 and so those who are struggling with their personal finances, should seek advice now to prevent it becoming insurmountable.”