Personal Insolvencies in The Region Rise As The Cost-Of-Living Crisis Tightens Its Grip


A big increase in the number of bankruptcies in the region represents a "worrying trend" as households continue to struggle with rising living costs, according to a Bristol-based insolvency expert.

The latest quarterly figures released by the Insolvency Service reveal that while bankruptcies across Bristol, Bath, North Somerset and South Gloucestershire are down by around 16 per cent since the last quarter, they are 73 per cent up on the same period last year.

David Bridge, Bristol-based associate director in Evelyn Partners' restructuring and recovery services team, said:

"Year on year, there were 45 per cent more bankruptcies in the region in 2023 than in 2022, which is a worrying trend.

"Numbers for the quarter are highest in the Bristol and North Somerset areas (both 17), followed by South Glos (10) and BANES (8). This league table is mirrored over the previous 12 months."

He added:

"The personal statistics show that interestingly, despite significant volatility over the past few years, the total number of personal insolvencies is now broadly in line with pre-pandemic levels.

"Although Individual Voluntary Arrangement (IVA) numbers continue to fall, this drop is offset by increasing numbers of Debt Relief Orders (DROs) and Breathing Space applications.

"It is clear from the number of Breathing Space applications that this tool is providing a helpful moratorium for many people in financial difficulty. However, as we cannot see what follows the Breathing Space, it remains unclear whether this temporary relief from creditor action will provide the longer-term solution or simply delay a formal insolvency procedure.

"This could just be a sticking plaster that temporarily masks a high number of IVAs and bankruptcies that could follow later on."

Contributory factors

David Bridge continued:

"As has been widely publicised, the cost-of-living crisis is impacting individuals nationally and across the region, with more and more people seeking help.

"Despite a recent drop, inflation remains high at 4.2 per cent. It will be interesting to see what the Bank of England does with the level of interest rates going forward.

"Retail sales are down, showing a 3.2 per cent drop in December 2023. Retailers are speculating that many households spread the costs of Christmas over earlier months, including taking advantage of Black Friday deals. This does suggest that there is less disposable income for many.

"Fuel costs continue to rise – the energy price cap increased by 5 per cent on New Year's Day but analysts are predicting a fall in the second quarter of 2024, though this still remains unaffordable for many.

"In a recent survey by the Office for National Statistics, an estimated four in 10 adults have said it was very or somewhat difficult to afford payments and they were therefore using less fuel. This makes depressing reading at this time of year.

"Regarding housing, average UK house prices are estimated to have fallen by 2.1 per cent in the year to November 2023, however, private rental prices continue to grow as landlords struggle to meet the increasing costs of borrowing and utility bills.

"Average rents are up 6.2 per cent in the year to December 2023, the highest rate hike since January 2016. Worse could yet follow as many low-cost mortgage deals are still yet to mature and the impact of the higher cost of borrowing has yet to fully come out."

Company insolvencies

Meanwhile, the latest figures for corporate insolvencies published by The Insolvency Service, for Q4 of 2023, shows there were 6,788 (seasonally adjusted) registered company insolvencies. This was a rise of 14 per cent in the total number of such insolvencies compared to the same period in 2022.

Nigel Fox, Bristol-based director in the restructuring and recovery services team at Evelyn Partners, said:

"It should be noted that further analysis of these latest figures reveal a dramatic increase of just over 80 per cent in the number of creditors' voluntary liquidations in this period when compared to the same period in 2019, the last quarter before the pandemic hit.

"There are no doubt a number of reasons behind this surge in creditors' voluntary liquidations, but part may be due to smaller companies trying to recover from the pandemic and paying off Covid-19 related loans being hit by increasing costs.

"This is in contrast to the fall in the numbers of administrations and company voluntary arrangements between Q4 of 2019 and 2023, which are the insolvency procedures often used to rescue a business or company.

"Smaller companies tend not to have the same reserves as larger companies, so cannot weather the combination of the current high levels of inflation, interest rates and energy costs."

Fox added:

"Professional advice should be sought as early as possible, in order to maximise the likelihood of a rescue before it is too late. The earlier that advice is sought then the greater number of options there will be for the business."