Personal insolvency rates have been steadily rising after 2022’s massive spike as households struggle with the dramatic increase in the cost of living and cost of lending. This has left B2C businesses not only fighting decreased consumer spending power but also a rise in bad debts.
The record number of businesses falling to insolvency has been well documented, in the business pages at least, as the UK economy continues to struggle to recover from the shock of the COVID years. But very little attention has been given to the high number of personal insolvency rates.
If you were to look at government commentary on long term personal insolvency trends, or any other blindly optimistic source, it will say that there is a downwards trend.
Unfortunately, this is a case of using the technical truth to hide the real.
Whilst it is true that the spike seen in the late 00’s financial crisis hasn’t been reached again, and it was followed by plummeting rates, the last 10 years has seen a clear rising trend. A trend that is expected to continue.
Almost every year since 2014 has seen an increase in the number of people filing for insolvency, showing a worsening condition of personal finances from long before COVID.
Of course, COVID has exacerbated the problem, leading to a spike in 2022 of over 118k, as people struggled with the cost of living crisis. Prices may have fallen to the point we no longer talk about cost of living in terms of crisis, but they are still significantly higher than 2019 and affording the basics remains a struggle for many.
This spike was followed by a decrease in early 2023 but numbers have rising each of the last 5 quarters.
What’s worrying about this is that usually when something causes numbers to spike, both for businesses and individuals, it gets rid of the ‘bad’ in the economy and leaves behind a largely stable and financially healthy cohort. As can be seen in the sharp decline in individual insolvencies after 2009’s peak.
But the constant rise in quarterly insolvencies over the last 5 quarters shows that as a nation our finances have been getting steadily worse over that time.
With the recent contraction in our economy and the impending large increase in labour costs to business expected to see static wages, job losses, and price rises the stage is set for a potentially record number of people being forced to file for insolvency in 2025.
This leaves B2C companies contending with a significant fall in consumer confidence and rise in the risk of bad debt whilst also contending with their own rises in costs.
Meaning they must do everything they can to protect their revenue and cashflow. Red Flag Alert provides you with a complete solution to do just this with our market leading consumer credit reports, business credit reports, and raft of innovative tools to speed up and improve your processes.
Speak to an expert to see how we will let you do smarter, safer, and faster business.