Sharp rise in corporate liquidations

by Gill Montia

Story link: Sharp rise in corporate liquidations

The Insolvency Service has reported a sharp rise in the number of companies going bust.

The figures, which cover England and Wales, show a 51.6% year-on-year rise in corporate liquidations in the final quarter of 2008, to 4,607.

Compared with the third quarter of last year, the number of businesses wound up because of debt rose 11.9%.

A shortage of credit and the recession have meant that for the entire year, the number of firms liquidated increased by 24% to 15,535.

According to insolvency practitioner Alan Tomlinson, the UK’s small and medium-sized businesses have suffered the most.

Speaking to BBC News, Mr Tomlinson said he expects the situation to deteriorate even further in 2009.

Meanwhile, individual bankruptcies and people entering Individual Voluntary Arrangements (IVAs) increased to 29,444 in the three months to the end of December, up 18.5% on a year earlier and 8.2% on the previous quarter.

In addition, experts are warning that creditors could become less likely to agree to IVAs as the economic downturn continues, fuelling the rise in personal bankruptcies.

In December, accountants KPMG predicted that up to 150,000 people will either be declared bankrupt or enter into IVAs or Debt Relief Orders (DROs) during the course of 2009.

DROs are being introduced in April and are aimed at people who have less than £15,000 in debt, less than £300 in assets and less than £50 per month to repay their debt, after all their essential expenditure is covered.

A successful application for an order will mean the debt is wiped out.