Debt collection has become an increasing problem in the UK following the ground-breaking amount of loan defaults and insolvencies over the past 12 months.
Here are some general statistics regarding defaults and insolvencies in the UK currently.
UK personal and business debt statistics
The Bank of England is expecting default rates to jump considerably in the third quarter of this fiscal year. Defaults occur when someone fails to repay a debt on security or a loan – whether it’s missed payments or no payments at all.
This is forecasted given that, in July 2021, the average credit card debt per household was £2,030. What’s more, the average debt in the UK overall was £62,670 per household.
Similarly, in the same month, a total of 1,094 registered companies became insolvent, whilst 305 people a day were declared bankrupt or insolvent between June and August. Insolvencies are those debts that businesses or individual persons cannot pay, leading to them filing for bankruptcy.
This statistic is 13% higher than the statistics representing the previous year, leaving extreme cause for concern amongst debt collectors.
Why aren’t debts being repaid?
The coronavirus pandemic has caused many individuals and businesses financial troubles over the past year. Government support schemes, such as the furlough scheme, are now winding down which is only likely to increase financial pressure.
However, the government also increased the amount of debt at which people can apply for a debt relief order from £20,000 to £30,000 – therefore expanding the existing criteria and contributing to higher debt statistics.
Amongst those who took advantage of new government support incentives, small and medium-sized enterprises rank the highest.
Despite these concerning numbers, lenders expect that the availability of unsecured credit will only rise in the coming months. This is especially the case as consumers continue to relay their financial stresses over government schemes ending on to banks who are increasing their default rates in turn.
Why debt collection is more important than ever
As more and more consumers rely less on government support, businesses are likely to see a disruption to their payments. Yet effective debt collection ensures that invoices are paid on time and therefore protect the cash flow of businesses.
For consumers, debt collectors can assess their needs and identify those who are most vulnerable when it comes to liquidation and improve their communication with businesses.
Nightfox is a personal and business debt collection company that is more than happy to service your needs. For more information, get in touch with our team today.