Insolvencies up 44.1%
Friday, 02 February 2007 12:00
The last three months of 2006 saw a 44.1 per cent increase in the number of people becoming insolvent.
Some 29,804 people became insolvent in England and Wales in the fourth quarter of last year - this is 7.1 per cent more than in the summer and 44.1 per cent up on the same period a year ago.
The number of people declared bankrupt increased 24.8 per cent to 17,063 annually, but the real growth was in the number of Britons taking out an individual voluntary arrangement (IVA) - which rocketed 81.9 per cent to 12,741.
"Rising personal insolvencies are, in the most part, fuelled by consumers who borrow to spend, struggle to repay what they've borrowed and then quickly find themselves caught out in a spiral of debt they can't escape from," said Mike Gerrard, Grant Thornton's head of personal insolvency.
"The problem is at such a serious level that almost 300 people are becoming insolvent each day."
And it could get worse.
"The problem has been heightened by increases in the cost of living with rising utility bills, council tax and interest rates biting where it hurts," Mr Gerrard added.
"However, with the Bank of England reporting that lending to individuals in 2006 increased by over ten per cent to £11.6 billion, the problem is clearly a long way from being resolved."
As to why IVAs were accelerating so much faster than bankruptcies Grant Thornton's head of IVAs, Mark Allen, pointed to the advantages of becoming debt free in a set amount of time, typically five years, and the fact bankruptcy's more restrictive terms do not apply to IVAs.
"IVAs are not about to dry up or reduce in numbers for the foreseeable future as the UK personal debt problem is far from resolved."
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