The number of people filing for bankruptcy in the UK shot up to a new record in the first quarter of 2006, and the numbers are expected to rise rapidly this year. There were 23,351 insolvency filings in January-March, a 13% rise on the previous quarter and 73% on a year earlier, the Department of Trade and Industry said.
The news coincided with figures showing that mortgage repossessions are at a 13-year high. In the first quarter of 2006 there were 22,997 repossessions, a rise of 17% on the previous quarter and 57% over the year, the government said yesterday.
Mike Gerrard, head of personal insolvency at Grant Thornton, said: "To put it into context just over the last five years there have been over 226,000 personal insolvencies, enough to fill Old Trafford more than three times over."
The growth in insolvencies was the worst since 1991 when the economy was in deep recession.
The full impact of Christmas spending partly accounted for the worsening figures, practitioners believe. One reported someone who had run up debts of £180,000 on 63 credit cards.
Peter Sargent, the regional activities committee chairman of R3, the Association of Business Recovery Professionals, said: "We are faced with a culture of people wanting to spend, spend and spend and not realising the consequences, coupled with the ease of obtaining credit cards and the need for people to be educated on how to manage their finances.
"Spring always brings an increase in personal debt as people want a fresh start and also it’s currently so easy for people to go into bankruptcy, with less stigma attached than years ago."
Pat Boyden, of PricewaterhouseCoopers’ business recovery services practice, said: "Some people are now so in debt that they are using credit to buy everyday items like groceries, and possible interest rate rises could worsen the situation further."
Britain’s total personal debt rose above £1 trillion last year. For the first quarter of this year there were 15,389 bankruptcies, up 13% and 51% on the quarter and year respectively, and 7,961 individual voluntary arrangements (IVAs, agreements between debtor and creditors to pay off at least some of the debts), up 14% and 142%.
Louise Brittain, partner at insolvency group Baker Tilly, said: "I think part of the increase is due to a change in culture towards IVAs. People are also getting annoyed with credit card companies making so much money out of them."
Insolvency practitioners warned that Britain’s easy credit culture would push the number of personal insolvencies above 100,000 for 2006 as a whole, up from 67,000 last year.