British households are increasingly struggling with problem debts, according to alarming official figures, in the starkest indication yet of the UK slipping into the red.

Government statistics for England and Wales show applications for individual voluntary arrangements (IVAs) – a means of managing personal debt – reached their highest level since they were introduced in 1987.The spike in their usage comes amid a 10.6% increase in wider insolvencies since the end of June.

The figures paint a worrying picture of Britain in the red, and comes as the growth of personal loans, credit cards and car finance outstrips the rise in earnings by almost five times. Bank of England data shows personal debts have risen to levels unseen since the financial crisis, reaching more than £200bn.



There were 15,523 IVAs recorded in England and Wales in the third quarter, rising from 13,290 in the same period a year ago. The voluntary means of repaying an individual’s creditor some or all of the money they are owed, with the help of an insolvency practitioner, made up two-thirds of all insolvencies.

There was a 2.1% increase in debt relief orders – available to those who have a low income, low assets and less than £20,000 of debt – from June to 6,274. However, the number of outright bankruptcies – whereby an individual’s assets may be sold to pay for their debts – fell slightly to 3,682.

Adrian Hyde, of insolvency and restructuring trade body R3, said: “Falling real wages and exhausted credit limits may have helped to push personal insolvencies up again ... Some people have trouble paying for basics, like food or housing, let alone paying for luxuries.”



The figures come as the Bank of England prepares to increase the cost of borrowing with the first interest rate hike in a decade from as early as next week. It also comes amid worrying signs for the economy, as consumers rein in spending amid inflation outstripping wages.

When taking account of inflation, real wages fell by 0.4% in the three months to August, the sixth consecutive month of negative earnings. That’s despite the lowest levels of unemployment in the UK since the mid 1970s.

An interest rate hike could exacerbate problems for individuals with problem debt, as they may see an increase in their borrowing costs. However, the increase is only expected to be a modest 0.25%, returning the rate to 0.5% – the level it stood at before the Bank’s emergency rate cut in the wake of the Brexit vote.

The government figures show that in the 12 months ending in September in England and Wales, one in 477 adults – or 0.21% of the adult population – became insolvent. This was slightly up from one in 489 at the end of June, although was the highest rate since the end of December 2014.

In Scotland, there was a slight increase in individual insolvencies to 2,472, in the continuation of a generally increasing trend since late 2015. Although there was a decrease in the number of individual insolvencies in Northern Ireland in the three months to the end of September from the level in June this year, there was a 25% increase from the same period in 2016, to stand at 684.

The latest figures also paint a worrying picture for businesses, showing an increasing number of firms running into trouble since the EU referendum. The number of companies registered as insolvent is 15% higher than this time last year. The increase appears to confirm a change in direction from falling insolvencies between 2010 and 2016, according to Hyde.

He said: “An interest rate rise is just around the corner, too. Although it may be a small one, it may be too big for those businesses and their customers already on the edge.”