Personal insolvencies rise to new record as unemployment bites

More people than ever before were declared insolvent in England and Wales during the third quarter of the year. Figures released by the Insolvency Service yesterday reveal that there were 35,242 personal insolvencies over the three months to the end of September, up by 28 per cent on the same period of 2008, and by 6 per cent on the previous quarter.

Just over half of the insolvencies were fully fledged bankruptcies, while around 17,000 people entered into an individual voluntary arrangement (IVA) or a debt relief order (DRO). Both are court-approved insolvency arrangements that fall short of full-blown bankruptcy, but enable borrowers to write off some, or all of their debts, subject to the approval of creditors.

Anthony Cork, a director of the accountancy firm Wilkins Kennedy, warned that the insolvency figures were likely to continue rising even if the UK recession comes to a formal end, as expected, during the final three months of the year.

"Those who have already suffered job losses are just starting to be represented in these figures, but there are many more behind them still battling to weather the storm," Mr Cork said.

"Historically unemployment has continued to rise even as the economy begins to recover, and this means that personal insolvencies can only soar even further. Things are likely to become very bloody indeed."

There is also some concern that the Insolvency Service's figures do not include debt management plans, where people agree with their creditors to pay a set amount each month, often of a token sum. These schemes do not count as insolvencies and no central register is kept, though many thousands of struggling borrowers are thought to have been advised to accept such arrangements with lenders.

Yesterday's data also included some better news on corporate insolvencies. Some 1,300 companies suffered compulsory liquidation during the third quarter, 9.8 per cent fewer than in the previous three-month period. There were an additional 1,578 company insolvencies – the first stage of the winding up process – but the overall rate of increase is now much slower than in the personal sector.

Bankrupt Britain? Financial crisis adds £1.5 trillion to national debt

The United Kingdom's national debt will rise by £1.5 trillion as a result of all of the government interventions in the financial crisis, the Office for National Statistics said yesterday,

revealing that it is now treating the liabilities of some of the banks and other institutions where the taxpayer has taken chunky stakes as falling on the state.

The ONS said it was close to completing an analysis of how the balance sheets of institutions such as Royal Bank of Scotland, which is now 84 per cent-owned by the taxpayer, should be reconciled with the national accounts. It has also had to consider the statistical treatment of interventions such as the government guaranteeing the debts of some institutions, which only trigger liabilities in the event that they are called upon. Such "contingent liabilities" totalled some £330bn at the end of September.

The exercise is to some extent an academic one, but the £1.5 trillion increase in the national debt will nevertheless embarrass the Government. Not all the debt is purely theoretical – the ONS said the Government had to borrow an additional £4.7bn in 2008 to pay for its various interventions, plus a further £3.3bn during the first nine months of 2009.