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Official figures release today show that there have been massive increases in both personal and business bankruptcies as the credit crunch continues to bite.

The lack of working capital, usually provided by bank overdrafts or secured lending together with the problems of obtaining credit insurance have been blamed for a 98% increase in companies going into receivership and a 52% increase in companies going into administration. Some of those who have gone into administration may survive but only after painful restructuring which could see many workers being made redundant.

Company Voluntary Arrangements are also up by some 56%. These are schemes where companies can agree to pay back only a proportion of the money they owe to other people, usually over a three of five year period. However past experience suggests that the vast majority of these CVAs fail with companies still unable to meet the reduced payments, and the companies are eventually wound up.

Individual insolvency has also soared, in Scotland by 71%, in Northern Ireland by 39% and in England & Wales by 19%. This lower figure may be partly explained by the fact that there are some options to insolvency in England & Wales that are not available in Scotland. It may also be partly explained by the fact that a higher proportion of small businesses in England & Wales are run as companies than in Scotland, again because of some legal differences.

Whatever the reasons there can be no doubt that things are getting bad and they may well get worse before they get better.

 

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