Company insolvencies up 18% in October, DROs up 71%

The number of individual insolvencies decreasing compared to the previous year indicates a slight improvement in financial well-being among consumers. However, the sharp increase in debt relief orders (DROs) suggests that a growing number of individuals are struggling with debt and resorting to formal debt relief measures, which could be related to rising inflation, increased living costs and higher interest rates. The rise in company insolvencies indicates an extremely challenging business environment, with rising interest rates, high inflation and supply chain disruptions big contributors. The outlook is that both individuals and businesses are facing continued hardship, which does not look like letting up anytime soon. In the meantime, the Government merely look on.

Debt Relief Orders are a solution for those with less than £30k of unsecured debt, and struggling financially each month. The huge 71% increase in DROs shows how many borrowers are having to reach out for formal help and support where previously they may have been treading water servicing their debt with lower interest rates. As credit card firms reduce the availability of 0% finance, and the opportunity to remortgage and refinance is significantly harder to achieve, this was inevitable. The quicker we can reduce rates and improve affordability on mortgage borrowing, the better these figures will become.

It comes as no surprise that these numbers have in the main gone up. The same pressures people are feeling on their household budgets are also being felt in business. However in business, unless they have punters through the door they have zero income to pay the bills. We need to spare a thought or two for the business owners, the entrepreneurs and risk-takers who are being hit with successive blows. They would not have chosen to have a failed business. Often they lose it all at such a time. Many get no financial support and are then tarred with the failure brush, struggling to build things again, get credit, employ others, and support communities. One of the failings of the credit system is how it treats those who have had businesses go bust. Many company failures in recent years were due to things totally out of the owners' control.

The legacy of Sunak won’t be halving inflation, it will be the pain and suffering he and Andrew Bailey have inflicted on British households. The amount of people and businesses unable to cope with rising levels of debt and higher interest is yet to be seen, but these figures indicate how rapidly things are turning bad.

Company insolvencies have been steadily rising since the end of Lockdown. No doubt the effects of the pandemic affected this and the current challenging economic environment is continuing to punish many businesses. Better news on individual insolvencies though, 6% lower than October 2022 with people seeking to enter IVAs down 27%. With economic pressures easing up, those remaining businesses may just have weathered the worst of the storm.