Consumer confidence not affected by bankruptcies

Despite the 73 per cent increase in bankruptcies since last year, economics analyst Lombard Street Research remains positive regarding the consumer outlook.

“We remain optimistic on the UK consumer outlook,” said the firm’s Michael Taylor. “The recent surge in individual insolvencies almost certainly contains an element both of a general deterioration, but also a one-off adjustment to reflect a less onerous bankruptcy process.”

The news follows a report from the Department of Constitutional Affairs that the number of bankruptcies has risen this quarter by 57 per cent from last year’s levels, a rise which Mr Taylor stresses comes from “very small” base levels.

He argues that with current employment and disposable income levels, only a small minority are experiencing problems for debt, with most people unaffected by this rise.

However, IVA provider ClearDebt believes that this study worryingly underestimates the impact personal insolvency is having on families in England and Wales.

ClearDebt chief executive, David Mond, commented: “In the first three months of this year almost as many private individuals went bust as did in the whole of 1998. In the last two years roughly one in every 150 households in the UK has seen someone go into a personal insolvency procedure – which must mean many, many more are acutely concerned about their debt.

“Finally, in the unlikely event that numbers of personal insolvencies do not accelerate further in 2006, we are still set to see around 96,000 personal insolvencies this year – 40 per cent up on 2005.

“I’m concerned that, increasingly, organisations representing the creditor community are whistling in the dark about the consequences of lending policies that have led to Britons being more than £1 trillion in debt.”

This is supported by evidence from the Debt Counsellors, which says that nearly two-thirds of people advised suffer from health problems due to debt, so anyone in financial difficulty or nearing bankruptcy is advised to seek help to sort out their situation.