The Insolvency Service has reported a staggering rise in bankruptcies and company insolvencies in the first three months of the year.

According to new figures released today (1 May) by the Insolvency Service, the number of company insolvencies soared by 56% in the first quarter of 2009.

There were 4,941 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales in the first three months of the year. This figure has increased 7.1% on the previous quarter and by 56% compared with the same period last year.

The number of individual insolvencies in England and Wales also increased significantly; up by 19% from last year to 29,774, which is the highest figure since records began in 1960. This figure was made up by personal bankruptcies, which rose by 23.4% to 19,062, and by Individual Voluntary Arrangements (IVAs), which also increased dramatically by 11.8% to 10,713 over the year.

Stephen Speed, Chief Executive of The Insolvency Service, said: “Although the numbers of corporate insolvencies in the first quarter of 2009 has risen by 43.6% over the same period last year, reflecting the impact of the recession on business, many companies continue to make use of the rescue mechanisms such as administration and company voluntary arrangements (CVAs) so that they can keep trading and where possible, save jobs and supply chains.”

The construction, manufacturing and hospitality sectors in particular have been hit hard by recession and have experienced the most insolvencies.

Analysts have predicted that the situation is unlikely to improve in the coming months as the recession fully takes hold.
 
Despite many companies feeling the strain, Mr Speed emphasises that bankruptcy must be adopted as a last resort and warned people from using it as an easy way out.

“Bankruptcy must not be seen as an easy option for those who have contributed to their own problems”, he said.

“There are sanctions for those bankrupts whose behaviour can be seen as reckless, wilful or culpable and where debtors can pay something towards their debts, The Service will ensure that they do pay.”