80 per cent of trade professionals expect to see personal insolvencies rise

MORE than 80 per cent of respondents to a national survey of insolvency and restructuring professionals said they expect personal insolvency numbers to increase over the next year.

By Greg Wright
Sunday, 26th July 2020, 12:03 pm
Updated Sunday, 26th July 2020, 12:06 pm
Eleanor Temple, the chair of R3 in Yorkshire and a barrister at Kings Chambers in Leeds
Eleanor Temple, the chair of R3 in Yorkshire and a barrister at Kings Chambers in Leeds

The study, which was carried out by the insolvency and restructuring trade body R3, paints a gloomy picture of the UK’s economic prospects.

Nearly half (44.5 per cent) of the respondents to R3’s member survey who work in personal insolvency said they expect personal insolvency numbers to be somewhat higher than 2019, while two in five (41.6 per cent) expect them to be significantly higher than last year’s figures.

Of those who expect numbers to rise, the majority (61.5 per cent) expect the increase to happen between October and December this year.

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Three in 10 think it will occur between January and March 2021, while just 3.4 per cent expect the increase to come between July and September of this year.

Eleanor Temple, the chair of R3 in Yorkshire and a barrister at Kings Chambers in Leeds, said: “The Government has introduced unprecedented levels of support for businesses and consumers since the start of the pandemic, and a number of financial services providers have also taken steps to help financially challenged consumers, for example through offering increased forbearance and payment holidays.

“This has meant that the number of people considering a personal insolvency process or asking for advice around one has not risen as sharply as we may have expected during circumstances like these.

Ms Temple added: “However, these support measures are temporary, and do not cover everybody.

“When they come to an end, a number of people are likely to find themselves in financial difficulty if their circumstances haven’t returned to what they were before the pandemic.

“With concern around future unemployment levels rising, and borrowing conditions returning to more usual patterns, it is vital for anyone in financial distress to seek out high-quality advice from a qualified provider.

“Our message to anyone whose budget is under pressure is not to wait until matters come to a head, as the sooner you get advice, the sooner you can start to get a grip on your financial situation.”

She added:, “It’s not uncommon for a business insolvency to lead to an individual becoming insolvent, especially if the person in question has agreed to take on liability for a business’s debts via a personal guarantee as part of an attempt to turn it around.

“With businesses of all sizes facing difficulty as a result of the COVID pandemic, it isn’t surprising that members expect this to be a common trigger for personal insolvencies in future.

“Credit cards, loans and overdrafts are also frequent personal insolvency triggers – and are areas where banks, building societies and credit card providers have offered temporary support to consumers in the form of options like mortgage and debt repayment holidays, and interest-free overdrafts.

“These will have allowed people who have been affected by the pandemic some time to adjust, but they are only temporary, and their ending will mean people who haven’t returned to a pre-crisis financial position will struggle, which is why we expect more people to need help and support managing their finances.”

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