UK NEWS

INSOLVENCY LEVELS 'UNCHANGED'

Insolvency rates expected to remain unchanged despite credit crunch.

Thursday May 1,2008

Government figures are expected to show that the number of people declared insolvent remained flat during the first quarter of the year.

The Insolvency Service is likely to say that around 15,000 people went bankrupt during the first three months of 2008, with a further 9,000 taking out individual voluntary arrangements (IVAs), according to KPMG.

These figures would be broadly in line with ones reported for the previous quarter, but would be considerably lower than for the same period of 2007, with IVA numbers dropping by around 25%.

But Mark Sands, director of personal insolvency at KPMG, said the figures were likely to be the calm before the storm, with numbers expected to begin rising again in the second half of the year.

He said: "The credit crunch will take its time to filter through to the ordinary individual, but by the end of this year we will see record levels of personal insolvency."

Pat Boyden, partner in the Business Recovery Services practice at PricewaterhouseCoopers, is expecting a slight rise in the number of people declared insolvent, but he is also expecting a fall in the number of IVAs arranged.

He said this fall in IVAs, under which interest on debt is frozen in exchange for a set amount being repaid each month, was likely to reflect people looking for other solutions to their debt problems.

He said: "Banks are trying to avoid people going on to IVAs and they are looking for other solutions, such as debt management plans."

He added that many so-called IVA factories had exited the market, while there had also been a fall in television advertising for the arrangements.

But Mr Boyden also expects the figures to get worse going forward.