The number of people in England and Wales turning to insolvency to deal with debt problems has risen to a seven-year high as consumer credit tightens and wages stagnate.
There were 34,108 individual insolvencies in the fourth quarter, an increase of 34.8 per cent on the third quarter.
In 2018 the number of people who became insolvent in England and Wales in 2018 was 115,299, a 16.2 per cent rise from 2017.
There were 71,034 individual voluntary arrangements (IVAs), an agreement which allow people to freezer their debts and pay them back over a set period of time, an increase of 19.9 per cent on 2017 and the highest level ever recorded.
Stuart Frith, president of insolvency and restructuring trade body R3, said: “As banks and other lenders have tightened their credit standards in response to the Bank of England’s concerns around consumer over-indebtedness, many people have run out of road.”
Brian Johnson, an insolvency partner at accountants H W Fisher & Company, predicted that a rise in interest rates could lead to a further spike in individual insolvencies.
“Given the level of household indebtedness any increase in interest rates in the near term is likely to push these insolvency figures through the roof,” he said.
Company insolvencies also increased 10 per cent to 16,090 in 2018, the highest level since 2014.
A tightening of household finances and competition from online rivals hit the retail sector hard with high profile failures last year including HMV, House of Fraser and Evans Cycles.
The use of company voluntary arrangements (CVAs), which allow companies to agree a rent reduction with their landlords, increased 16 per cent to 356.
Johnson said: “The rise in CVAs likely to have been driven by the retail sector last year, which faced a perfect storm of reduced consumer spending, internet shopping, an interest rates rise and minimum wage increase.”
Richard Tett, a restructuring partner at law firm Freshfields Bruckhaus Deringer, said: “The UK high street has been facing challenges for many months with numerous insolvencies occurring and lacklustre Christmas results now pushing some retailers towards more serious restructurings.”