The Government’s Insolvency Service published its latest statistics today, covering the first three months of 2012. The figures show no huge changes compared to recent trends, with personal insolvencies decreasing slightly on the same period last year, whilst the number of companies going into liquidation has risen slightly over the same period.
During the quarter 28,723 people became bankrupt, or entered into an Individual Voluntary Arrangement (IVA) or a Debt Relief Order (DRO) which was a decrease of 4.7% on 2011. The number of companies being wound up was 4,303 which is an increase of 4.3% compared to the first three months of last year. The number of distressed companies entering either administration or a Company Voluntary Arrangement (CVA) remained broadly similar to last year.
This leads to two observations based on these figures:
Firstly, the numbers themselves are not catastrophic. Far from it: in the past 12 months, 0.7% of active companies went bust and 1 in 372 individuals became insolvent. Now I’m not downplaying the impact that those insolvencies have on the businesses and people who are directly affected – financial failure is upsetting, damaging and painful for those concerned, whilst the impact on suppliers and the wider supply chain can be devastating. But more than 99% of active companies are still trading a year later and you probably don’t know anyone who has been made bankrupt in the past 12 months unless you have a lot of friends (and Facebook friends don’t count).
Secondly, the figures aren’t showing any real signs of improvement. The current recession – now officially classified as a ‘double dip’ recession – is worryingly different from the Great Depression of the 1930s as well as the recessions in the early 1980s and early 1990s. In the 1930s, the economy had recovered to pre-recession health within 15 quarters but we are now in the 17th quarter after the start of the current downturn, with no sign of the economy recovering to previous levels of activity. The 1980s and 1990s recessions ended sooner. So the faltering path of the economy over a protracted period is a real cause for concern. Add in the ongoing turmoil in the Eurozone and impact that this will have on the wider Western economy and there is likely to be plenty more pain ahead.
If you are concerned about your business or personal finances, call Paul Moorhead today to arrange a free consultation on 01709 331300. We can help.