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Charles Turner, partner at FRP Advisory LLP and Deputy Vice President of Insolvency Practitioners Association, comments on the Insolvency Statistics

3 February 2012

"The fact that last year's total numbers for personal insolvency have fallen from their historic highs should be treated with extreme caution as this disguises the financial difficulties households continue to face. The widely reported growth in 'pay day' lending is a better reflection of the reality - it is clear that many consumers are finding it necessary to resort to expensive loans to tide themselves over until the end of the month. There can be little doubt that there are widespread challenges being faced by consumers as household budgets are squeezed by increases in basic domestic costs, with income levels remaining depressed and an uncertain employment market. 

"Many debtors are living in a twilight world because it isn't in the interests of their creditors to call time and force them into a formal insolvency process; simply because it's unlikely creditors would recover very much. IVAs generally result in better returns for creditors which is why their numbers are holding up. The situation is not dissimilar to the "corporate zombie" scenario whereby high numbers of businesses are simply surviving because their creditors don't want to trigger insolvency in a market where the forced sale value of assets is depressed by low demand. A fact borne out by today's very small quarterly increase in corporate insolvencies."

Comment from Charles Turner, Partner at FRP Advisory LLP

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