[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Friday, 4 February, 2005, 12:39 GMT
Bankruptcies soar to record high
An outstanding bill
Rate rises have failed to cool the UK's appetite for spending
The number of people going bankrupt hit a record high in the last three months of 2004, figures from the Department of Trade and Industry have shown.

Individual bankruptcies were up 34.6% on the same period last year and 8% on the previous quarter, suggesting higher interest rates are beginning to bite.

On a seasonally adjusted basis, 13,013 individual insolvencies were recorded between October and December.

But company liquidations fell 0.9% to 2,2938, down 11.1% year-on-year.

The record high level of consumer debt suggests that a number of people have borrowed to their limits.
Howard Archer, Global Insight

Of those people in England and Wales unable to pay their debts in the last three months of 2004, 9,803 cases were bankruptcies and 3,120 Individual Voluntary Arrangements (IVAs) - which allow debtors to come to an agreement with their creditors.

Surging debt

"The fact that the number of individual insolvencies rose significantly through 2004 ... indicates that higher interest rates have increasingly pushed heavily indebted people over the edge," Global Insight economist Howard Archer said.

The Bank of England has raised rates five times since November 2003, from historic lows of 3.5% to the current 4.75%.

But as the Bank has increased rates in an effort to cool consumer spending, overall consumer debt has soared past the 1 trillion mark.

The latest figures from the Bank itself show consumer credit and mortgage borrowing growth accelerated in December.

Mr Archer warned that the Bank should carefully consider the risks to the economy before pushing rates any higher.

"The record high level of consumer debt suggests that a number of people have borrowed to their limits and are vulnerable to even a modest rise in interest rates," he added.

The BBC is not responsible for the content of external internet sites


News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East | South Asia
UK | Business | Entertainment | Science/Nature | Technology | Health
Have Your Say | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific