BUSINESS failures and personal insolvencies are set to rise dramatically over the next 18 months, a gloomy survey said today.

A poll by insolvency industry trade body R3 suggested the recession was only now taking effect and the economy would not begin to recover for another year and a half.

Peter Sargent, R3 spokesman for Huddersfield and Halifax, said: “For the past three or four years, a number of businesses that were not performing well have been kept alive artificially by the easy availability of credit, which has now dried up.

“Many smaller business owners have been borrowing to their limit, including using their personal credit cards to fund the business.”

Insolvency experts responding to the survey said they expected business failures to rise from the official figure of 13,091 in 2007 to almost 15,700 this year and 18,440 for 2009 – a 41% increase over the two-year period. However, one in five respondents thought that the figure would exceed 20,000 in 2009.

Although current levels of personal insolvency are already at record highs, insolvency experts predict these will continue to soar.

In 2007, there were 121,796 personal insolvencies. Respondents think by the end of this year, the total will reach 132,700 and 148,352 by the end of 2009.

“We would anticipate a nine-month lag, with a spike in the figures for the second quarter of 2009,” said Mr Sargent, of Begbies Traynor in Halifax.

“The route into personal insolvency is not an overnight process and unsurprisingly people put off dealing with financial problems until they have exhausted all other options.”

Over half of the 2,000 respondents (54%) said they were seeing an increase in the number of unsecured lenders – such as banks and credit card companies – trying to recover the money they are owed by taking security over people’s homes. In some cases they later repossess these homes.

“Lenders are looking for new ways to recover their money,” said Mr Sargent. “Now it is not just non-payment of a mortgage that can lead to repossession of homes – and banks like Northern Rock are leading the way.”



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