By Daniel Hunter

Statistics released by RSM Tenon’s online early warning system, Tracker, have revealed that the number of personal insolvencies continues to decrease and 2012 had the lowest level in the last four years with only 112,000,- a 7 per cent drop on 2011.

However, RSM Tenon warns that the bad start to the year for the High Street could leave many families employed in the retail sector at risk of insolvency.

The first seventeen days of 2013 saw four key retailers fail, affecting over 10,000 employees, and in 2012, 54 companies failed affecting over 48,000 employees. It seems likely that in 2013 there will be more redundancies in the retail sector.

The level could even reach 2008 proportions, when over 74,000 people were affected by 54 retail insolvencies. To add to the pressure on those employed in the retail sector, half of retailers are planning to cut staff numbers by April 2013 as reported on Channel 4.

"The lack of consumer confidence is certainly having an impact on the retail sector, as we can see by the recent high profile retail corporate insolvencies in January alone," Mark Sands, Head of Personal Insolvency at RSM Tenon said.

"Families who have members employed in this sector could lose their jobs and find themselves in dire financial straits with escalating debts. In addition, they may not be able to find a job for many months. An insolvency solution may be the only way out to keep their creditors at bay."

The British Retail Consortium (BRC) has said many retailers are trying to create jobs where they can, but these tend to be part-time positions rather than permanent. Wage levels will drop even if a temporary part time position can be found.

The picture isn’t that rosy for those employed in other sectors even if they have permanent jobs. Rising costs, frozen salaries and wage cuts can still have an impact on family finances especially if they were in debt before the credit crunch.

Individual Voluntary Arrangements which usually require the individual to pay creditors over a five year period, decreased by 8 per cent in 2012 compared to 2011, which shows that people are less confident about their long-term employment prospects. If people lack confidence or are mis-sold Debt Management Plans, IVAs will continue to fall. However, due to their very nature, i.e. being dependent on confidence levels, 2013 is likely to see peaks and troughs and we expect IVAs to remain around the 40,000 level’.

More low-income families will also be on a tight budget in 2013 due to the Universal Credit to be introduced later this year. This will affect those who live in low- income areas, where many are on benefits but will now be expected to contribute towards Council Tax from their household budget. In 2012, Council Tax was previously covered by benefit payments.

"Despite the decline in personal insolvencies in 2012, millions of people are still shouldering debt incurred before the credit crunch and are struggling to balance their monthly household budgets," Mark concludes.

"Consumer debt levels are not going down. However, despite the levels of consumer debt and the threat of greater unemployment caused by the failure of some large retailers, I believe this year will continue to have lower levels of individual insolvencies with approximately 110,000 by the end of the year, a drop on previous years."

Join us on
Follow @freshbusiness