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The official statistics for corporate and individual insolvencies, published by the Insolvency Service, for the second quarter of 2009 show that the overall number of insolvencies has continued to rise, albeit at a much slower rate than in the recent past.

Individual insolvencies (bankruptcies, debt relief orders and individual voluntary arrangements) were up 9.3% on the previous quarter, 27.4% more than in the corresponding quarter last year. Personal insolvencies are now running at record levels.

Corporate insolvencies (compulsory liquidations and creditors’ voluntary liquidations) rose by 2.9% compared to the first quarter, but 39.1% higher than the same quarter in 2008.

At first sight, therefore, the insolvency figures may have reached something of a plateau. However, the experience of the early 1990’s is that insolvencies did not peak until something like two years after the worst of the recession had passed. Also, the second quarter of the year has historically shown a dip in insolvency numbers.

Pressure from the Government has resulted in banks holding off foreclosing on customers up to now. Additionally, the HMRC “time to pay” scheme has deferred some £3 billion in VAT and PAYE payments, which arguably has encouraged businesses to trade whilst insolvent. In many cases, all this has simply delayed the inevitable. Our concern is that many businesses, which may be salvageable if action is taken early enough, are actually being run beyond the point of no return, and beyond any possible rescue.

Directors and other stakeholders really do need to recognise their predicament at an early stage, and seek help. Our advice to businesses, therefore, is to work with their accountants and other professional advisers to plan and monitor profitability and cash flow obsessively, and engage with creditors as soon as they can.

IMPORTANT NOTE: This article is intended for general information only. It is not a substitute for specific advice which should be sought for specific cases. We cannot accept responsibility for any action (or decision not to take action) made in reliance on the content of this publication.