Britain’s debt crisis continues

by admin on 8 May 2007

The BBC reports here on the increasing number of insolvencies:

“More than 30,000 people became insolvent in England and Wales during the first three months of 2007, official figures show – a new record.

This is an increase of 23.9% on the same three-month period in 2006, the government’s Insolvency Service said.

However, the rate of increase in insolvency is starting to slow.”

Well the rate of increase may indeed be slowing but insolvency is still increasing. And this is not just some short term trend. The consensus is that your average Brit was already carrying too much of a debt burden before the recent Bank of England rate rises just exacerbated an already bad situation. The BoE has raised rates nine times since hitting a low of 3.5% in 2003. But the question now is just how much further will they go? The current rate stands at 5.5%. They have two very good reasons not to raise rates again, the first, as mentioned, is not to aggravate the debt crisis, the second is based on recent data showing a lowering of inflation. On the other hand, despite an apparent slowdown in much of the country, housing inflation for the country as a whole is still increasing due to the robust London market.

Rate increase or not, with such high personal debt levels insolvencies will continue to increase for the foreseeable future. Whether the rate of increase will speed up again remains to be seen. It’ll be interesting to see the insolvency figures for the Q2 2007. New statistics are published quarterly on the insolvency service website here

Also Keep watching this space for further analysis and comment on Britain’s debt crisis!

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