Number of people needing breathing space from debts increased by 25% last year
There was a 25% increase in the number of people needing a break from their debts last year.
The Insolvency Service reported that across England and Wales, there were 88,390 registered 'breathing spaces' in 2023. These breathing spaces, which include 86,928 standard and 1,462 mental health registrations, offer legal protections from creditor action.
A standard breathing space lasts up to 60 days for those with problem debt. For those undergoing mental health crisis treatment, a mental health crisis breathing space is available.
This lasts as long as the person's mental health crisis treatment, plus an additional 30 days. The number of breathing spaces in 2023 was 25% higher than in 2022. Since the scheme started on May 4 2021, over 200,000 breathing spaces have been registered.
However, registering for a breathing space doesn't necessarily mean entering a formal insolvency procedure. Despite the increase in breathing space registrations, the number of people formally going financially insolvent last year fell to the lowest annual level since 2017, with 103,454 personal insolvencies recorded - a 13% drop compared to 2022.
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Personal insolvencies, which include bankruptcies, IVAs (where money is shared with creditors), and DROs (for those with smaller debts they can't pay), have dropped in 2023. The Insolvency Service noted that IVAs are at their lowest since 2017, while DROs hit a record high since starting in 2009.
Bankruptcies went up a bit from the 40-year low in 2022 but are still less than half of what they were before 2020. On the other hand, company insolvencies in England and Wales last year were the highest since 1993, with 25,158 companies going bust in 2023.
Even though more companies went bust in 2023 than in the last 30 years, there are more companies around now, so the rate of businesses failing compared to all active ones was still lower than during the 2008/09 recession. Mark Ford from Evelyn Partners said: "Inflation might have moderated but many costs are still rising, particularly wage bills, which many firms are struggling with as earnings growth has gathered pace."
Nicky Fisher, president of R3, an insolvency and restructuring trade association, warned: "The last year has seen a rising tide of corporate insolvencies. Unless the economic picture improves, costs come down and people start spending, it seems likely that insolvency numbers will remain high this year."
Ms Fisher added: "The upsurge in consumer spending that many businesses had been hoping for since the end of lockdown hasn't happened, or at least hasn't been sustained, and the firms who were hanging on and hoping for it have simply run out of time and money."
She continued: "We also know that there is often a time lag between people facing serious financial difficulties and the release of personal insolvency statistics, so the figures seen in government data may not be a real-time representation of the current hardships faced by many UK households."
"Financial distress and money worries are still serious problems in England and Wales, and the last 12 months have hit many people's finances hard. Rising bills, food and fuel prices were a major concern and a major expense in 2023, while high inflation forced up interest rates and left a lot of people worrying about the costs of mortgages and loans."
"Our message to anyone who is worried about their finances or the financial health of their business is to seek advice as soon as possible. We know how hard it is to talk about this topic, but starting the conversation when these problems are new will give you more options and more time to take a decision about how you move forward than if you'd waited."
* An AI tool was used to add an extra layer to the editing process for this story. You can report any errors to [email protected]
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