“The UK economy is headed for a coma” as insolvencies increase and mortgage debt balloons

EXPERTS are warning that “the UK economy is headed for a coma” with new figures showing households are under growing financial strain.

Individual insolvencies in England and Wales rose to 29,370 during March to May 2025 – a 4.4% increase year-on-year, equivalent to roughly 319 people a day, new figures show.

Outstanding mortgage debt soared to £1.663 trillion in April, adding £38.3 billion year-on-year, or about £155,714 per mortgaged household. 

At the same time, the hiring intentions index slipped to +8, a level seen only during the early pandemic, as uncertainty around the upcoming Budget and global tensions erode employer confidence.

Credit card usage reveals further strain: spending rose 4.6% month-on-month to average £825, though still 1.4% below last year’s peak. 

Balances climbed 1% from May and are up 4.6% year-on-year. Worryingly, the share of balances being repaid dropped by 2.1% month-on-month and 5.7% year-on-year. 

Industry experts warn these trends reflect more than seasonal uncertainty.

Anita Wright, Chartered Financial Planner at Ribble Wealth Management, issued a stark warning for the UK

She said: "It looks like mounting strain on household cash-flows that is already bleeding into the wider economy. The lesson from 2008 was brutal but clear: when consumers cannot service their debts, the dominoes fall quickly. Consumer spending makes up around 60% of UK GDP. 

"That is why a lower share of card balances being repaid, more two-month arrears, and a year-on-year rise in personal insolvencies are important warning signs. The credit data is therefore flashing amber before the macro data turn red. 

"If Q2 already shows stress, Q3 rarely improves by itself, and Q4 the most credit-sensitive quarter of the year – can deteriorate quickly. The consumer debt crisis is already here,it is accelerating, and is likely soon to reshape everything. 

"Policy makers face an ugly trade-off; cut rates too far and inflation risks rekindling; keep them high and the squeeze deepens. At this rate, the UK economy’s headed for a coma – zero growth, no heartbeat, just a slow drift into economic oblivion."

Riz Malik, Director at Southend-on-Sea-based R3 Wealth, added: “Households are still under strain with even those with 6 figure incomes struggling to make ends meet at present. 

"Everyone expects to be more worse off post budget. Those waiting for the loving feeling to return have more chance of finding out where Angela Rayners principle residence is.”

Scott Gallacher, Director at Leicester-based Rowley Turton, said Brits are under increasing strain.

He added: “Households are maxed out — and the economy could be next. Like the government, it seems many of us are maxing out our credit cards. To be honest, I’m not surprised. 

"The ongoing cost of living crisis, combined with the stealth tax of frozen bands and allowances, means more people are struggling just to keep their heads above water. 

"Add in the impact of Trump’s tariffs, which will push up prices further, and the knock-on effect of households tightening their belts on retailers, tradesmen and small businesses, and we risk sliding into an economic death spiral.”

Philly Ponniah, Chartered Wealth Manager and Financial Coach at Philly Financial, said she is seeing evidence of this strain in her business.

She continued: “I’m seeing the strain even in high earning households where mortgage rate fixes have ended and now there is little to no breathing room in budgets – food, childcare costs and energy bills have all increased and the salaries haven’t kept up with inflation. 

"When even well paid professionals are choosing between paying down debt and covering essentials, things aren’t looking good. Discretionary consumer spending will definitely cool into the autumn.”

Patricia McGirr, Founder at Burnley-based Repossession Rescue Network, added: “What we’re seeing here are families cutting costs out of necessity, not choice. Every statistic tells a tragic human story. Insolvencies up 4.4% means 319 people a day admitting they cannot keep pace. 

"Mortgage debt at £1.66 trillion is not just a headline number, it is households stretching themselves thinner to keep a roof overhead. Credit card repayments slipping shows the juggling act is failing. 

"Two missed payments is often the moment when stress turns into crisis with mortgage lenders able to take enforcement action. When people can’t afford to pay their bills, the impact on the economy is felt far and wide. A blip? No. This is financial free-fall with no parachute.”

Samuel Mather-Holgate, Independent Financial Adviser at Swindon-based Mather and Murray Financial, urged the government to act.

He said: “Labour need to turn this economy around, and the time to act is now. After promising so much at the election, a year on and the plan for growth has gone stagnant. 

"This data indicates things are getting worse, not better, and the only way to stimulate growth is by slashing national insurance on employers to get them hiring. 

"This will mean painful decisions elsewhere, and the likelihood is an increase in PAYE or employees NI, but breaking this manifesto committment is a price worth paying if Britian is to feel better off overall.”

Rob Mansfield, Independent Financial Advisor at Rootes Wealth Management, added: “The cost of living crisis continues. It's tough out there and the winners will be the ones who are careful with their money. It doesn't bode well for the economy as so much of it depends on consumer spending. 

"People are getting squeezed from every angle and so where is the growth the government so badly needs, coming from?”