 400 Scots a week will go bust in 2012
2 January 2012: Over 400 Scots per week will be made bankrupt in 2012 according to leading accountants and business advisers PKF. The firm is predicting that over 20,000 Scots will have been sequestrated (the Scottish term for bankruptcy) or taken out a Protected Trust Deed (PTD) by the end of 2011 and that this figure will be even higher by the end of 2012.
The increase in the level of personal bankruptcy in the coming year will be due to continued cuts in public sector employment and little sign of an upturn in the economy. In addition if there was to be any increase in base interest rates there would be an enormous rise in the number of home owning bankrupts.
Bryan Jackson, corporate recovery partner with PKF, explains: “There was a widespread assumption that in 2011 the economy would start to show signs of recovery and that personal insolvencies would stabilise, albeit at an extremely high level. However, the fluctuations in the economy, the difficulties in the Eurozone, and the clear impact of public sector cuts is increasing the number of Scots facing financial difficulties.”
“The dramatic rise in the number of more affluent Scots being made bankrupt is a further sign that the after effects of the recession are spreading among all sectors of society with the result that I believe all personal insolvencies will continue to rise and remain at high levels for several years to come.”
Bryan continued: “Those individuals taking out a PTD tend to be more affluent with an income and assets. Prior to the recession if they got into financial difficulty the rising value of their property came to the rescue and they would remortgage.”
“Now with house prices remaining stubbornly static and a general reluctance by lenders to increase their exposure to risk homeowners with high debts are extremely vulnerable. If they lose their job it is likely that they cannot use the value in their home to keep them afloat until they find another job. Therefore there may be an increase in distressed sales of residential property and a consequent further fall in house values which, in turn, will exacerbate the financial plight of many in the market.”
Bryan concluded: “The number of bankruptcies rose steadily from the second quarter of 2008 until the second quarter of 2009 as thousands of poorly off Scots took advantage of the Low Income Low Asset legislation to make themselves bust. As those numbers have fallen away they have been replaced by a rapid increase in PTDs and I believe we will see these peak in 2012 as historic debt, job losses, and personal circumstances take their toll on the Scottish middle class. Unfortunately I believe we have more of the same and worse in 2012 that we had in 2011.”
Ends
For further information, please contact: Andy Konieczko, 020 7065 0537, andrew.konieczko@uk.pkf.com
Notes to Editors:
1. PKF (UK) LLP is a leading firm of accountants and business advisers with more than 1,500 partners and staff operating in 23 offices in the UK mainland firm, incorporating a wholly-owned financial planning company and associated offshore practices. The firm specialises in advising growing and entrepreneurial/owner-managed businesses, AIM and fully listed companies, and also has extensive experience in the public and not-for-profit sectors. Principal services include assurance and advisory; taxation; consultancy; corporate recovery and insolvency; corporate finance and forensic. The firm has particular expertise in advising sectors such as hotels and leisure; mining and resource; public sector; real estate and construction; professional practices; not-for-profit; and medical. The firm’s web site is www.pkf.co.uk
2. PKF (UK) LLP also offers financial services through its FSA authorised company, PKF Financial Planning Limited. PKF (Isle of Man) LLC is a limited liability company registered in the Isle of Man. PKF (Channel Islands) Limited is incorporated in Guernsey.
3. PKF (UK) LLP is a member firm of the PKF International Limited (PKFI) network of legally independent member firms. The PKFI member firms have around 2,200 partners and more than 21,000 staff in around 125 countries.
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