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Last Updated: Friday, 1 August, 2003, 14:12 GMT 15:12 UK
Bankruptcies hit 10-year high
pound coins
Are people borrowing too much?
The number of Britons going bankrupt has jumped to its highest level for 10 years.

The Department of Trade and Industry (DTI) said there were 8,889 individual insolvencies in England and Wales between April and June.

Coming on the back of recent record consumer borrowing figures of 10bn, the news has sparked fears that debt is now spiralling out of control in the country.

The figures are the highest since 1993, a time when Britain was just emerging from a slump that left millions of homeowners in negative equity as house prices dropped and interest rates soared.

Paying the price

Patrick Boyden of accountancy firm PricewaterhouseCoopers (PwC) said: "A hike in personal insolvencies is the price being paid for the easy availability of money.

With few penalties attached, people with nothing to lose are choosing insolvency to cleanse their debt
Patrick Boyden, PricewaterhouseCoopers
"A 14% annual rise in personal lending has contributed to a 14% rise in personal insolvencies.

"The sharp increase in personal insolvencies should ring alarm bells about the downside of the expansion in consumer credit," he warned.

Fears over mounting credit helping to fuel spiralling debts were underlined by the DTI's research.

Its study said a number of factors contributed to the rise in bankruptcies - including unemployment and the availability of credit.

PwC's Patrick Boyden added that the fact bankruptcy is becoming "easier" has made it "more attractive".

Figures mount

Consumer insolvencies are up 6.3% on the first quarter of the year and 14% on the same period last year, the DTI data shows.

We have seen a marked increase in insolvencies in both the IT and advertising industries
Mike Jervis, PricewaterhouseCoopers
Mr Boyden said: "With few penalties attached, people with nothing to lose are choosing insolvency to cleanse their debt."

He also warned the forthcoming Enterprise Act could fuel more increases in personal insolvency by "further reducing the stigma" of bankruptcy.

In the business realm, the number of companies going bankrupt between April and June fell 6.9% in comparison to the same period last year.

A total of 3,843 firms folded - up 4.7% on the first quarter.

Belt-tightening

But PwC added that while the fall in company failures reflects the greater support banks and creditors offer to firms, the DTI figures actually mask significant rises in certain sectors.

The accounting firm said failures in the construction sector rose 9% in the fist quarter of 2003, according to the most recent figures available.

Even more dramatic is the 134% jump in financial and business services sector insolvencies, it added.

PwC Business Recovery Services partner Mike Jervis said: "Continued corporate belt-tightening has hit the business services sector hard and we have seen a marked increase in insolvencies in both the IT and advertising industries.

"The fall in company insolvencies has been assisted by creditors' early warning systems which helps ensure that banks work with viable businesses so they don't go to the wall."




SEE ALSO:
Britons rack up record debts
29 Jul 03  |  Business
Big rise in cost of student debt
28 Jul 03  |  Education
Credit crackdown announced
22 Jul 03  |  Business
Britons 'in debt spiral'
21 May 03  |  Business


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