Personal Insolvencies rise in Q2

8th August 2019.

Analysis of Insolvency Service data by RSM shows that under-25s make up 6.5% of all personal insolvencies, compared to 1% three years ago.

Q2 2019 saw a total of 31,000 people declare bankruptcy, a 7% increase on the number recorded in Q2 2018.

Those latest figures from the Insolvency Service have shown that the number of individuals entering a personal insolvency procedure has risen and there is little evidence that the trend is about to reverse as rolling 12-month insolvency rate continues to rise, with the highest figures for Quarter 2 (Q2) figure since 2010.

We had an 8 year high in Q4 of 2018 and since then we have had a drop in individual voluntary arrangements and debt relief orders. However individual insolvencies remain elevated and the last 3 quarters have been the highest comparatives since Q4 in 2010.

The figures show the highest level of bankruptcies since Q4 in 2014 but they remain low in comparison to 2009 to 2014 levels.

There were 30,936 individuals entering either bankruptcy (4,228), a debt relief order (6,752) or an individual voluntary arrangement or IVA (19,956) in the second quarter of 2019.

Overall this means that 1 in 382 adults entered a personal insolvency procedure in the rolling 12 months to the end of Quarter 2, 2019. This beats the ratio of 1 in 388 adults in the rolling 12 months to the end of Quarter 1.

What they said : RSM

Alec Pillmoor, Personal Insolvency Partner at RSM said “As we predicted, following the near decade long highs of 2018 and Q1 of 2019, personal insolvency numbers remain high and remain comparable to the first quarter of 2019, resulting in an increase in the rolling 12-month insolvency rate.”

“With near full employment and low interest rates, you would expect personal insolvency rates to fall, but in fact, insolvency levels have risen by 7.2 per cent when compared with the same quarter last year. This suggests that many people continue to be over-optimistic when it comes to estimating their ability to meet repayment demands as they fall due.”

“Of greatest concern is the rise in personal insolvencies among young adults. Back in 2016, insolvencies among adults under 25 only accounted for one per cent of the total. Our research shows that this has risen to around 6.5 per cent today. In this climate of low interest rates and relatively easy access to credit, it is entirely feasible that young people without financial experience or literacy may be more susceptible to the temptations of easy money.”

“Furthermore, debt charities have also raised concerns about the rise in sub-prime credit cards being targeted at those with low credit scores. These can have relatively high APRs when compared to other short-term credit alternatives and serve to further the plight of those with limited understanding of how easy it is to rack up unsustainable debt. A note of caution for consumers in general however. Given the current weakness of the pound and Brexit-related economic uncertainty, many consumers may wish to give closer consideration to their holiday spending this summer to avoid getting into trouble further down the line.”

What they said : R3

Duncan Swift, President of insolvency and restructuring trade body R3, commented “Although total personal insolvency numbers have dipped slightly, the bigger picture is worth keeping an eye on. The last quarter saw the third-highest number of personal insolvencies since 2011. Individual Voluntary Arrangement (IVA) and Debt Relief Order (DRO) numbers have only fallen slightly, while bankruptcy numbers have climbed again. They’re now at their highest level since 2014, and tend to be a reasonably good indicator of serious, unsustainable indebtedness. The situation is still serious for the UK’s personal finances.”

“Although real wages have been increasing recently, they are still lower than they were before the financial crisis. Employment may be low, but it’s not necessarily secure for everyone. It may be that debt exhaustion is contributing to the declining growth rate of consumer borrowing – which is growing at the slowest rate in five years – rather than a genuine improvement in personal finances.”

“These factors, coupled with economic uncertainty, mean money worries are a fact of life for millions. R3’s latest Personal Debt Snapshot, which is a survey of more than 2,000 British adults’ personal debt concerns carried out in March, found that 40% of British adults were at least fairly worried about their current level of debt, and that the same proportion (40%) said they sometimes or often struggle to make it to payday.”

“R3’s research at the end of last year [October 2018] showed one in five British adults (20%) would find it somewhat difficult, very difficult or impossible to immediately pay an unexpected bill for an amount as little as £20, without assistance from an external source. This in itself is worrying, and indicates that many consumers have little financial resilience.”

What they said : Wilkins Kennedy

Louise Brittain, Partner and Head of Contentious Insolvency at Wilkins Kennedy said “I think the figures show that bankruptcies will continue to rise throughout the year because debts on credit cards are mounting and there comes a point when people are saying enough is enough.”

“Council tax bills have risen, fuel has risen, the cost of food is increasing on an almost weekly basis and the effects of last year’s interest rates is starting to be felt. Consumers have been trying to maintain their standard of living by borrowing but when personal debt reaches £20,000 or more, they are applying for bankruptcy.”

“I think people don’t want to carry that debt for five years through an individual voluntary arrangement and instead people are applying for bankruptcy to deal with their debts and re-build their lives. If you add in the uncertainty surrounding Brexit as well then consumers are having to make tough choices in the backdrop of all the questions which remain unanswered regarding our economy and politics.”

Do you sell on credit?

With pressures on the cash flow it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.

Those customers will look for the easiest option to boost their cash-flow. Don’t let it be you.

You can’t just assume your customers can and will pay you eventually, no matter how big their name is.

It is essential to have credit management systems in place to monitor and check your customers credit worthiness.

It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.

About CPA

The Credit Protection Association can help!

Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.

At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.

We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.

Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.

If you supply on credit, help us help you identify the risks.

Why use a third party collector?

As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.

Over the years we have collected billions in overdue invoices for our customers.

Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.

The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections

Ready to speak to an advisor?

For help or advice on credit management, entirely without obligation.

Call us today

0330 053 9263

CPA is passionate about late payment

The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.

We are extremely passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.

If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.

As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.

Under little used legislation, you are entitled to compensation for those late payments.

Now you can boost your own cash-flow.

CPA can help unearth the those hidden treasures.

We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.

Yes, CPA can help you boost your business cash-flow.

Don’t let your bankers control you, contact CPA today.

The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections

Read our blog here on how to crack down on the late payment culture.

Read our blog here on how to give late payers the slap they need.

The “Why” of the late payment culture.

Paying late is “crack cocaine” to big business.

Late payment culture risks “spiraling out of control”

New warning over catastrophic effects of late payments

visit our late payment compensation page

See our full blog and FAQ on late payment compensation

Do you realise you could be sitting on a fortune?

Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.

If you sold B2B on credit then there may be a hidden source of capital you can call on.

If you fancy an bit of extra cash in your business, rather than jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.

Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.

We can help you uncover the pile of gold, you didn’t even know you were sitting on.

If you trade with other businesses and were often paid late then you could be entitled to significant compensation.

Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.

Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.

You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.

That compensation could provide the cash boost your business needed.

But don’t delay, that compensation evaporates if not claimed within six years of the late payment.

How can CPA help?

CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.

We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.

Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.

CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.

The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.

We do the work, you receive the cash.

If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.

We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.

We are helping business owners who are looking to boost the returns from their business before they retire. We are helping businesses who have lost major clients after years of loyal service to get properly compensated for systematic late payment. We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.

Those former clients who regularly paid you late can finally be made to pay.