Personal insolvency levels approaching highest in a decade

The number of people facing insolvency is on course to reach the highest level for almost a decade in 2019 after an annual increase of more than 22% in September.

Revealing the devastating toll of mounting debts on British households, official figures showed the number of personal insolvencies climbed to 30,879 in the three months to the end of September, up from 25,169 in the same period last year.

A dramatic increase in bankruptcies across the construction industry sector also pushed the underlying trend for corporate insolvencies to a high not seen since the eurozone crisis was at its height in 2013.

Duncan Swift, president of the insolvency and restructuring trade body R3, said the figures provided “a worrying insight into the state of personal finances” and “further evidence that the economic and political turbulence of the last 12 months has taken its toll on businesses”.

Swift said persistently low wage rises had left consumer finances vulnerable to small shocks.

He said: “Although real wages have hit a recent high, they are still lower than they were before the financial crisis. Unemployment may be low but it’s not necessarily secure for everyone.”

The Insolvency Service said the total number of personal insolvencies over the first nine months of the year has reached 93,042 after hitting 115,319 for the whole of last year. Another quarter this year in excess of 30,000 would push the total to the highest since 2010, when the total reached 135,045.

Company insolvencies increased for the third consecutive quarter to 4,355 in the three months to the end of September 2019, up 1.6% compared to the same quarter last year to reach “the highest underlying level of company insolvencies in any quarter since the first quarter of 2014”, the Insolvency Service said.

Officials said the underlying trend was distorted by so-called bulk insolvencies that occurred in several quarters over the last three years after clampdowns by HMRC on the tax paid by personal corporations. The tax changes have forced many one-person companies out of businesses, increasing the number of insolvencies in a single quarter, they said.

The number of company administrations, which provide firms with a mechanism to restructure their debts, increased by 20% from the previous quarter, reaching the highest level since the first quarter of 2014.

Swift said Brexit uncertainty was a major factor pushing firms into the hands of their creditors.

“Uncertainty and stop-start stockpiling are among the factors hitting recruitment, investment, and wider business health, and we’re seeing more businesses worrying about their cashflow levels and their order books over the next quarter and the next year,” he said.

Alec Pillmoor, a personal insolvency partner at the accountants RSM, said it was concerning that “despite already seeing near decade-long highs over the last 18 months, personal insolvency numbers continue to rise and have exceeded 30,000 for the fourth successive quarter for the first time since 2011, and recorded the highest quarter three total since 2010”.

He said: “Longer term we would anticipate that this will increase further as following a recent YouGov poll conducted on behalf of the Stepchange debt charity, 29% of Brits expect their finances to actually get worse in the next year.”