British Deputy Prime Minister, John Prescott, has warned the UK that the Labour party is on the verge of bankruptcy and needs to tighten up its financial management or face being ruined by the £20 million business debts it currently holds.

Through a pitch for the party treasury post the Guardian newspaper, Prescott said, “We are facing a long-term decline in membership and a crisis in funding.

“We are only being kept alive by the Herculean work of party staff and volunteers, trade union contributions, high value donations and the goodwill of the Co-op bank.” 

Prescott, who was Deputy Prime Minister for 10 years under Tony Blair, become a member of the House of Lords early this year.

Prescott believes that the Labour party lost out of the May election based on the inadequate funding.

The Conservative party received major funding from billionaire donor Lord Ashcroft and became three times better-stocked than those of the Labour Party.

“Labour financed have always depended on trade unions, small donations and high value contributions by party members.

“Their value and role will be even more significant as the ConDem coalition looks to tackle party funding to our disadvantage.”

Prescott pointed out his approach to the recent election campaign which saw him travel 5,000 miles in a Ford Transit Van, campaigning for marginal seats.

The well-funded election campaign brought the party to power in 1997. “In 1997, the month-long battle-bus tour, with hotels, support staff and coach drivers, cost us in excess of £150,000.”

More UK budget travel companies are further facing insolvency after a combination of the economic downturn, volcanic ash, bad weather and strikes, which has resulted in a sharp fall in holiday bookings this year.

Kiss Flights – who sold holidays to Greece, Egypt, Turkey and the Canary Islands – went into administration on Tuesday becoming the seventeenth UK travel company protected by a customer protection scheme to go out of business this year, according to the Civil Aviation Authority.

Another 33 companies under the same scheme failed last year and the total is expected to be higher as not all travel companies are protected by Air Travel Organisers’ Licensing, which ensures that customers are compensated for any money paid and repatriated to their homes.

Travel companies have been hit by several factors.Holiday bookings have been hit by the economic downturn, a volcanic ash cloud closed most of Europe’s airspace for over a week during April and continued to cause havoc in May. The freezing weather in January led to flight cancellations and labour disputes have hit flights at British Airways PLC and threatened disruption elsewhere in the airline industry.

Kiss Flights announced that it hadn’t been able to pick up enough bookings to cover its overall costs due to the ash cloud that drifted down from a volcano in Iceland which caused chaos for travellers in April and May.

“On top of the poor yields and very late booking trends, our fate was sealed by very poor forward sales,” said Gary Ash, chief executive of Flight Options, Kiss Flights’ parent company.

Airlines and travel companies were forced to pay millions to passengers for the disruption caused by Icelandic ash cloud as well as costs of looking after repatriating stranded passengers.

TUI Travel – Europe’s largest tour operator – said that the total impact of the volcanic ash on its revenues was GBP105 million.

TUI could afford the hit as it made GBP3.4 billion in revenues in the three months to June 30th, a 4 per cent decline from last year.

The company warned that bookings were down 2 per cent since May 11th and that TUI Travel were outperforming the UK industry where bookings were down 10 per cent over the period.

Thomas Cook Group – Europe’s second biggest operator – make a large chunk of its revenues in the UK, said that bookings in the country were worse than predicted. The demand for all-inclusive holidays had risen because customers pay the bulk of their costs up front.

Large companies like TUI Travel and Thomas Cook will survive the downturn however the smaller, low budget operators are under massive pressure.

“Budget business work off low margins and emergency reserves have been eroded during the downturn,” said the consultancy firm PricewaterhouseCoopers (PwC). “This year’s shock events, such as the lingering ash cloud, have forced them to price low to win business. This discounting has been enough to push someone over the edge.”

PwC said many travel companies are at risk of insolvency because they have no assets to offer a controlled restructuring. They purely rely on bookings to pay suppliers, which made late summer a dangerous time for tour operators.

“This is a tricky time of year in terms of cash flows,” said Douglas McNeil, transport analyst at the stockbroker Charles Stanley. “That seems surprising in the middle of the holiday season, but cash flow is at its strongest in spring and early summer. Companies have to pay out to their suppliers about now, so this is the time of maximum vulnerability.”

Despite the UK emerged from recession late last year, concerns over the slow pace of the economic recovery and tough public sector spending cuts announced that the UK Government have led many potential travellers to worry about their job – and alter their budgets accordingly.

“Most people try to preserve their holiday plans, but they might trade down from two weeks to 10 days or a week,” said Charles Stanley’s McNeil. “All the budget companies are now feeling the squeeze and there might be another handful of insolvencies before we’re done.”

Competition in the market is fierce, adding to the tour operators’ problems.

“Suppliers are cutting distribution costs and trying to provide services through their own websites directly,” said Euromonitor travel and tourism industry analyst Nadejda Popova. “At the upmarket end, Hilton have been discounting heavily which is unheard of in this segment of the market. That has led to weaker sales for highstreet tour operators.”

“Most companies were hoping the crisis was over because the holiday peak was over,” Popova added. “But in the autumn we will see quite a lot of companies going bust.”

Confetti.co.uk – the Manchester-based business – has gone into administration by its owner The Hut Group, just 24 hours after it bought the company and sister venture, gadget and gift website iwantoneofthose.com for £600,000 from Findel PLC.

Together the two businesses made a £13.8 million pre-tax loss in the year to April and had £19.3 million in liabilities against £5.7 million gross assets.

RSM Tenon, the administrator, said it was still examining Confetti’s liabilities. It is “urgently” seeking buyers for the online business, having closed the company’s five stores on Friday.

A spokesman for RSM, said, “RSM is aiming to cover all outstanding orders.”

The spokesman also added that there is currently 1,100 orders outstanding, with an average value of £45.

Confetti’s insurance partner, Acumus, part of UK General Insurance Group, said it has 3,000 policies for weddings and honeymoons that it would honour. Louise Chadwick from Acumus said, “The insurance policy will stand as it is.”

However, there is a £50 excess on the policies suggesting that average Confetti customer will be out of pocket.

Customers of Confetti are dismayed at the collapse and are hanging on to whether their orders will be submitted.

“One using the avatar Snowflake on Confetti Forum, wrote, “I have purchased in excess of £400 from Confetti in recent months. I am starting to panic as I don’t want this to effect my wedding later this year.”

Confetti’s joint administrator, Kenny Craig, director with RSM Tenon, said, “The business has great potential for further development and the administration presents an outstanding opportunity for a retail business or entrepreneur to acquire an immediate presence in the wedding and celebrations market.

“We would urge interested parties to make contact in the next day or two to ensure they have a chance to bid for the business.”

The administrators have made 48 of Confetti’s 94 staff redundant.

For more information about business recovery or if your business is suffering from business debts then speak to Real Business Recovery today, the team that can help you get the most out of your business.

Pay Day Loans have soared in popularity since the crash of the financial market, and have further pushed people to the brink of insolvency.

A recent report has found that the number of Britons who have taken out payday loans has quadrupled in the last four years despite interest rates that frequently exceed 1,000 and even 2,000 APR, Consumer Focus revealed.

The report, ‘Keeping the plates spinning’ estimated that the average payday loan is now £294. Borrowers are taking an average of 3.5 loans each year. On top of this, two thirds of payday loan borrowers have a household income of less than £25,000 and more than half are under the age of 35.

The payday loans are generally taken out as a quick fix solution designed to be paid on the borrower’s next payday. However, the cost of the payday loans that are not repaid immediately increase dramatically. Charges can range from £13 – £18 for every £100 borrowed. Some online lenders can charge up to £30 for every £100.

Marie Burton, financial services specialist at Consumer Focus, said that borrowers deferring repayments take out repeat loans further landing themselves into deeper debt.

“With the credit crunch, demand for short term borrowing has significantly increased despite the eye-watering interest rates charged by some payday lenders.”

Corporate recovery partner with accounts and business advisors, Bryan Jackson, said that the sharp rise in the number of payday loans taken out was inevitable.

“There is clear evidence that many people are only just surviving financially at the moment. Even a slight change in their circumstances will put many thousands of Scots over the edge and into insolvency.”

Extortionate interest rates are pushing borrowers further into debt with many seeking help from insolvency practitioners to manage their debt.

“Taking a payday loan is an almost certain first step toward personal insolvency and I would urge individuals to address the underlying issue of their overall financial state rather than make a bad situation even worse,” said Jackson.

Consumer Focus said that a ban on payday loans could see borrowers fall into the hands of illegal loan sharks in order to get a quick fix money solution. Tighter controls on payday loan firms, as well as an annual limit on the number of short-term loans taken out or rolled out of five per household; more stringent affordability checks; and a code of practice for payday loan firms.

They also want banks to be able to provide short term loans to deter people from going to payday firms, with clear fee and charging structures in place.

The number of people who were declared as insolvent in England and Wales fell by 2.6 per cent during the second quarter of the year, new figures have shown.

A total number of 34,743 people were made insolvent during the three months to June, down from 35,682 in the previous quarter.

The latest figure is still a 5 per cent increase on the same period in 2009, the Insolvency Service said.

The number of companies put into administration in the last quarter was recorded at 4,080 – up 0.5 per cent on the revised figures for the first three months of the year, but down almost a fifth on corresponding figures for last year.

If the figures are broken down, it is revealed that 14,982 people will go bankrupt in the spring months, down 20.6 per cent year on year.

That is also markedly down on the 18,256 recorded in the first three months of 2010.

However the number of people taking out an individual voluntary arrangement (IVA) increased to 13,466 in the latest quarter – which is up 10 per cent on last year.

Insolvency practitioner have warned that these figures may prove to be only a temporary reprieve.

The current Government spending cuts could potentially force more people into insolvency due to the impact it will have on the job market.

The pub sector insolvency levels continue to remain high during the second quarter of 2009, despite there being a slight fall during the first quarter of the year.

Latest UK insolvency figures show that overall levels remain high, with administrations falling slightly, yet liquidations still at high levels.

Mark Wilson, partner at Baker Tilly Restructuring and Recovery LLP, said, “This quarter’s insolvencies levels in the licensed trade may be a modest fall on Q1 2010 numbers, but are still as hight as they were in Q1 2009 at the peak of the recession.

“The industry should remain cautious, particularly as the sector has been put on the notice for the impending VAT hike.”

With the closure of many pubs still ongoing and the fall of 6.3 per cent in beer sales in pubs and bars – according to the latest UK Quarterly Beer Barometer – the fall will continue to have a negative impact on the industry.

It isn’t all doom and gloom though. Although Company Voluntary Liquidations (CVLs) still remain high with a 10 per cent increase from Q4 2009 to Q2 2010, there has been a slight decrease in numbers from Q1 to Q2 2010.

Another positive is that adminstrations have almost halved since Q4 2009 and the use of Company Voluntary Arrangements (CVAs) remains relatively low.

Statistics released by the Office of National Statistics (ONS) show that company insolvencies in England and Wales have fallen for the fifth quarter running.

Despite this fall, Business Debtline, which provides expert debt advice to struggling businesses, has witnessed a 40 per cent year on year increase in the number of calls taken by its business debt advisors.

Paul Crayston, spokesperson for Money Advice Trust, the charity which rins Business Debtline, said,

“The continuing fall in company insolvencies is good news, but we need to be aware that it doesn’t necessarily tell the whole story. The increase in the number of calls Business Debtline advisers are taking suggests more and more small businesses are facing difficult times. That fewer of these businesses are being forced down the road of insolvency should be seen as a victory for free debt advice during these turbulent economic conditions.”

“We have found that 78 per cent of those businesses which call our services are able to agree and maintain a deal with creditors after receiving advice from one of our experts – a clear demonstration of how effective debt advice can be, not just for those struggling with their finances, but for creditors also.”

The number of insolvencies in the Republic appears to have levelled out, however their were still four companies going out of business every day last month, according to new figures.

Insolvency Journal – a website owned by accountants Kavanagh Fennell – found that 125 businesses went bust during July, c0mpared to 132 in June.

Despite the fall in insolvencies last month, 917 companies have gone under in the first seven months of the year, an increase of 22 per cent on 2009 and more than 150 per cent more than the whole of 2008 when 773 companies stopped trading.

In previous months the construction industry was the worst effected, losing 41 companies in total. Thus was due to the reduction in private sector activity and a fall in capital spending continued to cause problems.

Some 277 construction firms have collapsed so far this year, about 30 per cent of the total, which is up 11 per cent compared to last year.

The retail sector continues to suffer with 18 businesses falling last month.

Six motor companies closed up bringing the total for the year to 28.

Tom Kavanagh, a partner with Kavanagh Fennell, said that despite the slight reduction in the number of insolvencies it was not necessarily indicative of a recovery in the wide economy.

“The general perception is that there is a backlog of distressed cases and insolvencies are likely to increase during the second half of the year,” he said.

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Recent research into the world of borrowing has discovered some shocking truths about how people are handling their finances and what they are borrowing money for.

A recent study by insolvency trade body R3 discovered that Scottish holidaymakers are most likely to borrow with 12 per cent saying they either had or intend to borrow money to cover the cost of a holiday this year.

Londoners followed closely behind at 10 per cent.

Holiday-goers in the North West, Yorkshire and Humberside and the West Midlands are the least likely people to borrow in order to cover the cost of their holiday at just 3 per cent.

Frances Coulson, R3 vice-president, said, “That people are prepared to take on a substantial amount of debt for such a long period of time in order to afford a holiday is worrying, especially as these are still economically uncertain times.

“Personal insolvency hit record levels in the first quarter of this year and looks set to rise – so we are urging people not to spend more than they earn.”

It has been discovered that more than 70 people per hour are being declared insolvent amid the fallout of the recession.

The Insolvency Service latest figures found that 35,682 people across England and Wales were declared as insolvent during the first three months of the year, the highest level since records began in 1960 and 17.9 per cent higher than the same period a year ago.

The most up to date insolvency figures are to be published later on this week.

Further research found that around 2,329,500 holidaymakers have had to borrow on average £1,130 and will spend around seven months paying it all back.

Holidaymakers between 16-24 years old were the most likely to borrow, while those aged 60 and over were the least likely.

Ms Coulson added, “The figures points to a clear generational split in attitudes to borrowing and debt. We must continue to promote the idea of saving, rather than borrowing, to pay for luxuries is the best way to avoid a life dogged by financial problems.”

If you are looking for financial help and need to speak to an insolvency practitioner for all your financial problems then get in touch with Real Business Recovery, the corporate insolvency experts that can help you get the most out of your business.