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500,000 to fall into personal insolvency in three years
Jonathan Prynn, Consumer Affairs Editor07.11.08
Up to half a million people will be overwhelmed by their debts over the next three years, a leading City economist warned today.
Levels of personal insolvency are expected to rise to record levels as the recession takes hold and unemployment soars.
Official figures today show the number of insolvencies rose nine per cent to 27,087 in the third quarter.
The total is expected to hit around 110,000 for the year as a whole and at current rates 275 people a day are falling into insolvency or bankruptcy.
This is likely to be the start of an insolvency explosion as consumers who took on too much mortgage, bank and credit card debt find they are unable to cope.
Vicky Redwood, UK economist at Capital Economics, predicted the total will hit 140,000 next year, rising again in 2010 before peaking in 2011. Over the three years it is likely that as many as 500,000 people will have been forced into bankruptcy or other forms of personal insolvency, she said.
The figures are far higher than in the last recession in the early Nineties, partly because levels of debt are much higher, but also because new laws have made it easier to recover from bankruptcy. Outstanding personal debt now stands at just under £1.5trillion.
The expected wave of insolvencies will place extra strains on banks as they are forced to write off billions of pounds of loans.
Banks are also taking a harder line with borrowers who might previously have been able to take out new loans to tide themselves over.
Stephen Grant, insolvency partner at accountants Wilkins Kennedy, said: "The number of personal insolvencies is likely to go through the roof as falling house prices and rising unemployment begin to bite."
Louise Bond, personal finance manager at comparison website uSwitch.com, said insolvency or bankruptcy should "be the last resort for anyone with financial problems as they have a very serious impact on people's credit histories".
Today's figures from the Government's Insolvency Service also show a rise in the number of company liquidations, up 26.3 per cent in a year to 4,001 in the three months to the end of September. The number of larger firms going into receivership or administration is up 70 per cent to 1,277.
Reader views (5)
Australia was built by convicts and we have'nt done too bad so come on over I say.
- Kim H., Gold Coast , Qld, Australia
Interesting that Brits would want to immigrate to the U.S. In the US., approx. 1000 people file for personal bankruptcy per week, largely due to no health insurance. Thats right, the U.S has no national health plan. Throw in the economic crisis; foreclosures, two wars, soaring unemployment, etc. Why would anyone want to immigrate here? Then again, I dream of living in the U.K., sounds like paradise. Ever been deathly ill and go to hospital and be asked for a credit card to charge the costs? Or been kicked out of hospital for not having health insurance? Like me? Good luck. Respectfully, John~
- John, arizona, usa
Back in 2001 the company I worked for from leaving school in 1971 had a total overall of the state of the company and made 500 men redundant.The company then said to those who wished to stay they had to re-apply for their jobs and on top of that take a £70 yes £70 a week pay cut on there basic pay.
Every week of every year since that time I and my fellow workers have been £3,640 down per year and never in a million years will we ever get that money back, to date over £25k each worker has been lost to us.
Each and every year the cost of living rises and the biggest one of all is the Council tax,it has tripled since it came into being.
Not only the country is in debt we the tax payer are also in debt, the true cost of living is not reflected in wages and therefore you have no option but to go into debt and hope one day you pay it off.
For those who are debt free aren't you lucky,
for those who are not like me hang in there, soon we will see the light at the end of the tunnel, and it will be welcomed.
- John L., Scarborough N.YKS. U.K.
How nice of New Labour and the Tory scum to overtly and covertly sabotage peoples chances of immigration to Australia, Canada, and the USA
The deliberate government policies of Labour and Tory's have lumbered those who wish to leave the UK with criminal records for the most minor of offences thereby completely destroying ones chances of immigration.
So now we are forced to live within the prison walls and prison economy of the EU ruled by Germans
thanks Gordon
- A Brown, london uk
Well there are consequences for actions. Actions such as spending like mad cows to buy every 'bling bling' thing you can get - on credit. All those big pricey houses and flats that everyone has been crowing about, suddenly the true value is noticed.
If the people would quit chasing celebrities' lifestyles with non-celebrity income, they might have a chance.
I hope the benefits aren't cut though, it would be a shame to see MY income and lifestyle go down because some of you go bankrupt paying my bills too.
- Trunk, US
