Scottish bankruptcies down but double rate down south

THE number of Scots going bankrupt fell in the first three months of this year but experts have warned that the decline may be a lull before a renewed storm.

There were 5,175 personal insolvencies in Scotland in the first quarter, down 8.8 per cent on the previous three months and 9.9 per cent lower than the same period last year, according to official figures published by Accountant in Bankruptcy yesterday.

Sequestrations (the Scottish term for bankruptcies) were down 6 per cent on the previous quarter and 17 per cent from the same period in 2009. There was also a 12.7 per cent decline from the previous quarter in the number of people taking out a protected trust deed (PTD, a bankruptcy arrangement with fewer restrictions than sequestration). But, more than 9,000 Scots took out PTDs in the financial year to the end of March, a fifth more than the in the previous financial year.

However Scottish insolvencies continue to run at double the rate of those in England and Wales, according to analysis of the statistics by accountants and business advisers PKF.

And Bryan Jackson, corporate recovery partner at PKF, warned that worse could be yet to come. "What these figures tell us is that there are an enormous number of individuals who have accumulated quite staggering levels of debt in the last few years and have only now succumbed to bankruptcy," he said.

"Given that we are living in a period with unprecedented low interest rates, a fairly benign level of inflation and prior to proposed cuts in public sector jobs it would be foolish to regard the impact of the recession and the free spending days of the last decade to be over."

His warning was echoed by John Hall, Scottish council member of insolvency professionals body R3. Hall said: "Unfortunately the latest personal insolvency figures and economic background indicate that it may be three to four years before we see the numbers of insolvent Scots decline in any meaningful way as the hangover from the recession continues to be felt for some time to come."

The latest figures underline a continuing shift in the profile of the typical debtor in Scotland, with homeowners and those in work accounting for a rising proportion of PTDs.

Three quarters of those taking out a PTD earn more than 1,000 a month.

Hall said that with PTDs considered an "excellent barometer of the extent to which normal working families are struggling with debt", the long-term increase was cause for concern.

He said: "When you mention bankruptcy to most people their image is likely to be of someone earning very little, perhaps unemployed, with accrued debts over a long period. Yet these figures show that severe indebtedness is appearing among those with reasonable incomes, some of whom have accumulated staggering levels of debt."