- More than 100 people went bust every day in the three
months to the end of December, pushing personal bankruptcies to their highest
level in nearly 11 years and raising fresh concern about the scale of consumer
debt.
-
- The Department of Trade and Industry said personal bankruptcies
rose to 10,271 in the fourth quarter, up 12 per cent on the previous three
months. Compared with a year ago, the figure surged by nearly one third.
-
- The figures will be particularly alarming as individuals
will find it even harder to repay their debts because of the Bank of England's
decision this week to increase the cost of borrowing. Interest rates rose
a quarter point to 4 per cent and, many economists feel, rates could increase
again. John Butler, the UK economist at HSBC, said: "This is just
the tip of the iceberg. The news for the consumer is getting worse."
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- Charles Turner, the director of business recovery at
PricewaterhouseCoopers, said: "We are looking at record levels of
bankruptcy. It is reasonable to say a credit crunch is upon us. The interest
rate increase was not huge, but the direction was upwards and, for a significant
number of people struggling to cope with their level of debt, the impact
could be severe."
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- The number of people declaring bankruptcy between October
and December was the highest since the record 10,942 bankruptcies seen
in the first quarter of 1993. That was when Britain was just emerging from
the slump that left millions of households trapped in negative equity after
house prices collapsed.
-
- However, Capital Economics, an independent economic consultancy,
suggestedthe level could actually be at its highest since 1960. The body
said if the 1993 figures were seasonally adjusted, it would work out as
lower than the number recorded for the fourth quarter of 2003.
-
- There was better news for the corporate sector, with
the number of companies going into liquidation in the fourth quarter falling
to 3,316, 1.9 per cent down on the previous three months.
-
- PwC said companies had benefited from Britons' continued
spending. Mike Jervis, a partner at PwC, said: "We have seen real
winners and losers. Increased consumer spending is filtering through to
businesses with a significant fall in company failures."
-
- However, the benefit to business is unlikely to offset
fears that British consumers are running out of steam. On top of their
massive burden of debt has come evidence that house prices seem to be spiralling
ever higher.
-
- Halifax, Britain's largest mortgage lender, said on Thursday
the average homebuyer now has to pay more than five times their annual
earnings - a ratio that is even higher than during the last boom in the
late 1980s, which ended in a devastating slump.
-
- Vincent Cable, the Liberal Democrat Treasury spokesman,
called on the Government earlier this week to address the problem by introducing
regulations to curb the "tidal waves" of offers of credit to
consumers. Dr Cable warned if consumers were allowed to borrow at current
rates, their total burden of debt could hit £1,000bn by the summer
- equivalent to the external debt of Africa, Asia and Latin America combined.
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- Britain's bankruptcy laws change from 1 April under the
new Enterprise Act. Experts believe the legislation will be softer on those
who go bust through no fault of their own, allowing them to come out of
bankruptcy earlier than the current three-year period. However, those deemed
to have recklessly run up debt could see themselves barred from having
access to credit for up to 15 years.
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- © 2004 Independent Digital (UK) Ltd
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- http://news.independent.co.uk/business/news/story.jsp?story=488753
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