More firms set to become insolvent

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Corporate insolvencies during the third quarter of the year are likely to have jumped by 20% compared with the previous three months and soared by 40% compared with the third quarter of 2007, according to PricewaterhouseCoopers.

Overall the group thinks 4,039 businesses across England and Wales will have been made insolvent during the period as the credit crunch continues to hit firms.

The figures are also expected to show a slight increase in the number of individuals being made insolvent.

Insolvency practitioners are predicting that the rise will be the beginning of an upward trend in personal insolvencies, as the economic situation deteriorates, unemployment rises and credit conditions remain tight.

Mark Sands, director of personal insolvency at KPMG, said figures for the three months to the end of September were likely to show that 27,000 people were declared insolvent during the period, up from 24,553 during the previous quarter.

Within this total, he expects around 17,000 people to have been declared bankrupt, 4% more than in the second quarter and 9% more than during the same period of 2007.

A further 10,000 are likely to have taken out an Individual Voluntary Arrangement, under which interest on debt is frozen in exchange for a set amount being repaid each month, 6% higher than during the previous three months but 6% down on the third quarter of last year.

But he said that while these figures would be a "slight tick up" on the previous quarter, the number of personal insolvencies was likely to soar during 2009 to reach record levels.

Mr Sands said: "We expect that by the end of 2008, personal insolvencies will reach up to 110,000, as the credit crunch continues to limit the options available to consumers hard hit by increased household costs. During 2009, we think this figure is likely to dramatically increase to 150,000, as factors such as rising unemployment also start to take hold."