Q3 personal insolvency figures surge as UK households
struggle to make ends meet
(Please note these figures are available at:
http://www.insolvency.gov.uk/otherinformation/statistics/200811/index.htm)
The increase in personal insolvency figures for Q3 2008
indicates that a growing number of UK individuals are feeling the
effects of the economic downturn as personal debt and home
repossessions rise and UK households struggle to make ends meet,
says leading business and financial adviser Grant Thornton.
The Q3 2008 data issued today by the Insolvency Service and
analysed by Grant Thornton's Personal Insolvency practice show a
rapid increase in bankruptcies from Q2 2008 with 17,341
individuals entering into bankruptcy (up 12% in comparison to the
previous quarter ) and up 10% on the corresponding quarter of the
previous year (15,842). Individual Voluntary Arrangements*
(IVAs) were up 3.3% on the previous quarter but down 3% on the
corresponding quarter of the previous year.
Mike Gerrard, a personal insolvency partner at Grant Thornton,
says, "These latest figures coupled with increasing home
repossessions demonstrate the severity of Britain’s personal debt
crisis. The reality is that this spiralling trend shows no
immediate sign of abating."
"The Bank of England's recent aggressive interest rate cut of
1.5% to 3% is welcome news and should provide some respite to
struggling individuals at a time when inflationary and recessionary
pressures are rising rapidly. While it is unlikely the cut
will be passed on in its entirety, consumers should benefit from
the reduction."
"The marked trend towards debtors' petition bankruptcies away
from creditors' petitions seen in recent years has been
maintained. Q3 indicates that 83% were made on the petition
of the debtor, a similar level to that seen for 2006 and 2007 as a
whole."
Gerrard continues, "We cannot ignore the fact that credit
availability has now dried up and the prospect of a bleak Christmas
is looking very likely for many families across the UK who often
rely on credit cards and loans to get through the festive period."
"It is undeniable that households are struggling and personal
insolvency does not happen overnight but declaring one's self
bankrupt is often a last resort for people who have unsuccessfully
exhausted every other option available to them."
"There is often a six to nine month lag between people getting
into financial difficulty and the representative figures, so whilst
it is recognised that the Q3 2008 figures will include those
affected by the economic downturn, the true impact may not become
clear until next year," Gerrard says.
Statistics indicate that the number of people being made
unemployed is rising faster than at any time since the recession of
the early 1990s. Unemployment in the UK rose by 164,000 to
1.79 million between June and August**. It is widely forecast to
hit two million by the end of this year. Gerrard says, "If the
current downturn in the economy and housing market continues it is
inevitable that personal insolvencies will increase further in
2009."
IVAs likely to increase further in 2009
Mark Allen, head of IVAs at Grant Thornton, notes that IVAs have
increased by 3% (9,746) on the previous quarter (9,430) but are
down 3% (10,058) on the corresponding quarter of the previous
year.
"We have a seen a marked increase in IVA numbers over the last
month and as the sub prime market has effectively disappeared
consumers are unable to remortgage or consolidate their debts as
before. This will result in consumers who are over-indebted seeking
help quicker than any time in the last 5 years.
With the introduction of the fast tract IVA in April 2008/9 it
is likely that we will continue to see a marked increase in numbers
well into 2009, when the effects of the current downturn really
begin to filter through."