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Britons in debt distress at 6-year high as BoE ponders rate hike
[LONDON] The number of people in England and Wales filing for insolvency hit a more than six-year high in the second quarter, adding to conflicting economic signals for Bank of England officials as they consider whether to raise interest rates next week.
Seasonally adjusted data from the Insolvency Service showed 28,951 people registered as insolvent between April and June - up 27 per cent on a year ago and the largest total since early 2012 when Britain last flirted with recession.
There are questions about the long-term financial health of British consumers who have been squeezed by high inflation caused by the pound's sharp fall after the 2016 Brexit vote.
On Thursday, the Office for National Statistics said households' outgoings surpassed their income last year for the first time since 1988, raising concerns about debt problems among many consumers.
Most economists polled by Reuters think the BoE will raise rates to a new post-financial crisis high of 0.75 per cent next Thursday. The central bank believes inflation pressure is beginning to firm and that a slowdown in the economy in early 2018 was caused mostly by cold winter weather.
But wage growth has failed to pick up much and some economists are concerned that domestically generated inflation pressure is actually weakening, which would mean a rate hike would be unnecessary and even detrimental to households.
"While the economy as a whole is holding up surprisingly well, the number of people already falling into insolvency - or teetering on the edge of the abyss - suggests an interest rate rise may drive many more to the wall," David Birne, insolvency partner at accountants HW Fisher, said.
Individual voluntary arrangements, a form of debt relief short of bankruptcy, accounted for most of the rise in people registering as insolvent in the second quarter, the Insolvency Service said.
In England and Wales, which accounts for the vast majority of Britain's population, 1 in 433 people registered as insolvent - the highest rate in five years.
The Insolvency Service also said business insolvencies in England and Wales rose 12.6 per cent compared with a year ago, excluding recent "bulk" liquidations of personal service companies caused by a change to the tax code.