UK insolvencies at highest level since financial crisis
Personal debt rises to £1.6tn as record number of households turn to ‘bankruptcy deals’
The number of people who went brankrupt in 2017 soared to the highest level since the aftermath of the financial crisis, according to official figures that reveal the devastating toll of mounting debts on British households.
The Insolvency Service said 99,196 people were declared insolvent in 2017 – a 9.4% rise on the year before and only a shade below the peak figures recorded during the recession.
Record numbers of households are turning to “bankruptcy-lite” debt deals called individual voluntary arrangements (IVAs). These rescue packages – where individuals reschedule their debts and agree to much lower payments – hit a record high of 59,220 in 2017, up nearly 20% on the year before.
Britain’s personal debt mountain ballooned to £1.6tn in 2017, amid a worrying expansion in credit card spending and car finance deals. A study this week found that at least 70% of the UK’s working population are “chronically broke”, with many falling into credit card debt for everyday spending.
“One in 467 adults (0.21% of the adult population) became insolvent in 2017, up from 507 in 2016,” said the Insolvency Service.
There was a slight improvement in the insolvency numbers in the final quarter of 2017. “Individual insolvencies decreased 0.2% compared with the previous quarter. There was also a small decrease in IVAs, which fell by 0.9% compared with Q3 2017. IVAs however remained high and the three highest quarterly levels of IVAs since their introduction in 1987 were all recorded in 2017,” said the Insolvency Service.
Corporate failures also rose in 2017 amid a slowdown in the economy. An estimated total of 17,243 companies entered insolvency in 2017, a rise of 4.2% on the year before, said the Insolvency Service. The figures do not include the impact of Carillion’s failure, which is expected to force some smaller suppliers into bankruptcy.
R3, the trade body for insolvency practitioners, said that while the official figures are worrying, the real extent of debt problems in the UK may be even worse.
“With personal insolvencies it’s always worth noting that the official statistics don’t tell the full story: there is a lot of ‘hidden’ insolvency out there,” said R3’s Duncan Swift.
“There are potentially tens of thousands of people in non-statutory debt management plans. Although these plans are regulated by the FCA, there is no record of exactly how many there are. This makes it impossible to grasp the full scale of serious indebtedness.”
The rise in personal insolvency is unprecedented during a time of rising employment. Usually bankruptcy peaks when unemployment soars, but insolvency is now hitting the working poor.
Alec Pillmoor, personal insolvency partner at RSM, predicted that if, as expected, interest rates rise this year “even more over-indebted households may find themselves in difficulty.”
Please note this article originated from – https://www.theguardian.com/money/2018/jan/26/uk-insolvencies-at-highest-level-since-2008-financial-crisis
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