Trends influencing personal credit in 2025

Increased job losses, reduced hiring rates and a higher cost of living are expected to both increase demand for credit and fuel a rise in the number of personal insolvencies in 2025.

A new year is upon us! One that we all hope will have more favourable conditions to business than 2024. But does that look like it will be the case?

The answer is probably not.

But just because other businesses might struggle doesn’t mean yours has to. At Red Flag Alert, we know that with the right data, processes, and strategies it is possible for companies to thrive when others are struggling to survive.

Key to this, unsurprisingly, is your ability to make money. So, making sure that you’re going to get paid before extending credit will be foundational to any solid business plan for 2025.

To help you build your strategies for this year, let's take a look at some the predicted trends that will influence personal credit in 2025.

An increase in job losses

The looming national insurance contribution rise for employers introduced in the Starmer government’s first budget will see wage costs increase significantly overnight but it is expected that employees will ultimately pay the price.

It is expected, and generally accepted by almost everyone, that there will be large scale redundancies across the board to allow companies to afford this increased cost.

Worst affected will be companies that have high numbers of minimum, or nearly so, wage employees as they also have to contend with a rise in the legal minimum wage.

Current models project that we will see a flurry of redundancies before and immediately after the start of the financial year, a slowdown, and then either another spike or fall off as companies seek to optimize staff numbers after getting used to the new paradigm.

A decrease in hiring

The other side of the same coin is that most companies will not be looking to grow their workforce in the coming year.

Little easing of interest rates

The Bank of England appears to be resistant to the lowing of interest rates, at least in early 2025 as inflation is once again on the rise.

However, at the same time our economy shrunk for two consecutive months, raising fears of an impending recession. Given the predicted hostility of the coming year to business, many economists are warning of an impending recession; which is generally combatted by interest rates being eased.

Faced with two conflicted problems it is likely that the Bank of England will attempt to split the difference and keep interest rates relatively static.

Price rises

As costs go up, so to do prices. It is predicted by the Oxford University Centre for Business Taxation that 76% of the budget wage cost rises will be born by employees (via redundancies and wage freezes), leaving just shy of a quarter of the cost needing to come form elsewhere; which will in part be from raising prices.

This is feared to especially affect many of the basics, as supermarkets and similar businesses have large workforces of low paid employees.

Increase in personal insolvency

So far we have painted a dim picture, and hopefully not everything here will come to pass, but the truth is it’s going to be tough for many and too much for some.

What this means is that there should be an increase in the number of individuals going bankrupt this year.

Increased demand for credit

Whether people are nearing insolvency or able to manage, the predicted increase in household costs and freeze in income will increase the public demand for purchasing on credit.

Which offers an opportunity for those companies able to satisfy that demand, albeit in a high risk environment. If you are able to introduce the robust risk processes needed to do this safely, then 2025 could be a year of success and growth.

We offer all the data, innovative tools, and process automation solutions you need to achieve this. Speak to an expert today and make the most of this year.

Use Red Flag Alert for your consumer reports in 2025, the latest addition to our product range. An all encompassing risk solution for a range of industries.