UK personal & company insolvencies reach record levels

personal debt

Although the total number of individual insolvencies in Q4 2019 decreased by 15%, in comparison with the same period in 2018, largely due to a decrease in individual voluntary arrangements (IVAs), the total number of personal insolvencies in 2019 still reached its highest level, since 2010.

In 2019, the total number of all types of company insolvencies increased to their highest level since 2013 and compared with the previous year, the number grew by 6.3%. For the same period in 2018, the number of company insolvencies in Q4 2019 rose by 8%.

Commenting on the announcement Michael Mulligan, insolvency and restructuring partner at law firm, Shakespeare Martineau, said: “These latest figures paint a bleak picture for the macro economy overall and temper the pre-Christmas optimism caused by the ‘Boris bounce’. In reality, growth continues to stagnate, and business and individuals are feeling the effects. There are thousands of zombie companies hanging on across a number of vulnerable sectors.

“Brexit uncertainty and trade wars have dominated the economic landscape, sapping opportunities for growth and pushing those who are struggling further under water. For bricks and mortar retail in particular, which is already threatened by rising online sales, the knives are out and the fight for customer spending continues.

“Individual insolvencies have risen to highest annual level since 2010, with the UK retaining its status as the country with the highest level of personal insolvency in the world. The total number of County Court Judgments (CCJs) issued against individuals in debt reached 1.15 million in 2019 – the highest on record.

“The availability of seemingly ‘cheap’ debt and short-term loans continues to be an issue and people are still being caught out by the temptation of accessible borrowing. January figures from the Bank of England show that UK households owe £72.5 billion on credit cards, a total increase of £400 million in November 2019 alone

“One should bear in mind that these statistics don’t take into account the exceptionally bleak Christmas trading figures released by retailers earlier in January or the 1,200 small business owners (SMEs) who applied for loans between Christmas and New Year’s Day.

“Let’s not forget that interest rates are still at emergency levels despite the global financial crisis passing over 10 years ago. Interest rates must go up, not down, and that could further hurt consumers and businesses already feeling the pinch.

“All is not lost and 2020 may be a brighter year, with the UK now set to take a defined route out of the EU. However, no matter what the economic conditions, individuals and companies should look to take swift and confident steps the moment they feel that times may be becoming tougher than normal. Keeping a tight hold on budgets and borrowing, as well as reaching out for professional advice, is still as important as ever.”