Christmas hangover driving increase in personal insolvencies, says expert
A Christmas hangover is driving an increase in personal insolvencies as consumers continue to pay off their festive debts, according to an insolvency expert from top 20 UK business services firm Wilkins Kennedy.
The Individual Insolvency Statistics published for Q1 from January to March 2019 reveal a massive 16 per cent rise among personal insolvencies across England and Wales from the same period last year.
Company insolvencies also increased by seven per cent in the first three months of this year compared to 2018 which is the second highest underlying level of insolvencies in any quarter since Q1 in 2014.
Administrations rose by 27 per cent from January to March 2019 compared to the first three months of 2018 but Company Voluntary Arrangements (CVAs) have fallen compared to this time last year.
Louise Brittain, Partner and Head of Contentious Insolvency at Wilkins Kennedy – which has 18 offices throughout the South East of England – said: “There is still financial fragility in personal insolvencies. This three-month period traditionally sees the highest number of personal insolvencies since people are struggling to pay off their debts from Christmas.
“This shows people are addressing their financial issues and paying off their debts through Individual Voluntary Arrangements which primarily use income payments to meet at least some of the total debt mountains.
“The problem will come if there is an increase in interest rates which will have a devastating effect, because people will be losing some of their income to pay more on their mortgages and this will of course impact on repaying their unsecured debt.
“I would then expect individual insolvencies to become an issue and personal bankruptcies will increase.”
Louise said the latest statistics reflected that more and more companies are electing to enter into administration since it is quicker and more effective process to use to provide effective relief from creditor pressure.
“The ease of accessing financial relief quickly after entering administration means it is a preferred option for companies who need to have a fast process and deal with a sudden crisis,” she said.
“CVAs take quite a long time to put in place so by going into Administration, they immediately get protection from creditors.
“These figures show that more and more companies are needing to seek advice urgently or events are occurring that are taking them by surprise such as losing business from a major customer.
“As a business, Wilkins Kennedy is also seeing a rise in the number of administrations that we are dealing with and that is reflected in the national figures for England and Wales.”
Wilkins Kennedy is part of the CogitalGroup – an international business services group with annual revenues in excess of £450m, employing around 6,000 people across 177 offices.