Record insolvency figures
Figures released by the Insolvency Service today show that more than 135,000 individuals were declared insolvent last year, a 0.7 per cent increase on 2009, the highest figure since records began in 1960. The use of Debt Relief Orders is growing very quickly – 25,000, up from 11,000 in 2009; these are a new measure for people with low resources and low debts. This probably reflects the fact that there always was a crying need for the alternative route to insolvency, but also the stresses facing many consumers – a survey by the Association of Business Recovery Professionals found four people in ten “struggling to make it to payday”, with 35 per cent having difficulties with credit cards. They pointed out that
these figures do not include the number of people using informal insolvency solutions such as debt management plans, of which there are estimated to be around 700,000. Unfortunately, for those that are struggling with debt the worst may not be over. Inflation, the rise in the cost of fuel and the increase in VAT means that the cost of living has risen at a time when most of us are experiencing pay freezes, pay cuts and, in some cases, unemployment. Worryingly, our research found that, in the last quarter of 2010, there was a 4 percent jump in the number of businesses making redundancies.
The news on company liquidations was a lot more reassuring, with the figures for overall liquidations and compulsory liquidations both lower than the 2009 results. Persistent low interest rates and HMRC’s Time to Pay scheme can probably take a lot of the credit for this. The Financial Times pointed out that the number of companies going into administration (which tends to be used by larger businesses) rose in the last quarter, but it is also true that this figure was nearly a quarter lower than the same quarter in 2009. I agree with the Telegraph, which highlights the fact that corporate insolvencies are at their lowest since the start of the recession, but they also quote experts warning that the number of company liquidations is still well above the pre-recession level:
Total company liquidations
In other words, we aren’t out of the woods yet, by any means.
This news follows on from the latest Labour Research Department Survey (£) of union reps’ predictions for the future of the economy. LRD found that 59 per cent of workplace representatives believe that their employer will cut staff in 2011; 80 per cent in the public sector believe this, but so do 39 per cent in the private sector, with only 16 per cent expecting staffing to increase. Unsurprisingly, 57 per cent said job security was their main bargaining priority.
There were complementary results in the latest Chartered Institute for Personnel and Development Employee Outlook Survey. This found that:
- 46 per cent of employees report that their organisation has frozen pay, with another 7 per cent reporting cuts.
- 20 per cent say it is likely they could lose their jobs – 31 per cent in the public sector.