A report published by the Trades Union Congress (TUC) has revealed that UK household debt has ‘reached new highs’.
The report revealed that unsecured debt per household rose to £15,385 during the third quarter of 2018 – representing a rise of £886 when compared to a year earlier.
Meanwhile, total unsecured debt rose to £428 billion in the third quarter of last year, according to the report.
The TUC said that government austerity and ‘years of wage stagnation’ are the key factors behind the increase in unsecured household debt.
Commenting on the findings, Frances O’Grady, General Secretary of the TUC, said: ‘Household debt is at crisis level. Years of austerity and wage stagnation has pushed millions of families deep into the red.
‘Our economy is not working for workers. They need stronger rights and bargaining powers. Trade unions should be allowed the freedom to enter every workplace to negotiate higher wages.’
Research carried out by Sky has revealed that a significant number of young people are concerned about the state of their finances.
65% of those aged between 18 and 34 are concerned about how they would manage financially if and when interest rates rise.
The level of anxiety amongst individuals in this age bracket is significantly higher than that of any other age group, the research suggested.
The Bank of England (BoE) recently indicated that interest rates could rise ‘as soon as November’. Commenting on the issue, Mark Carney, Governor of the BoE, recently said: ‘If the economy continues on the track that it’s been on, . . . in the relatively near term we can expect that interest rates will increase.’
The base interest rate currently stands at 0.25%.
Meanwhile, separate research carried out by debt charity StepChange revealed that many young people are seeking debt advice. Two thirds of individuals accessing support are under the age of 40, the charity found.
The Bank of England (BoE) has warned that a significant rise in personal debt could ‘pose a danger to the UK economy’.
The Bank revealed that car loans, credit card balance transfers and personal loans have increased by 10% over the past year, whereas household incomes have risen by just 1.5%.
High street banks are at risk of entering a ‘spiral of complacency’ during a period of good economic performance and low loan issues, the BoE also suggested.
It warned that as the spiral continues, borrowers risk accumulating ‘more and more’ debt.
The BoE stated that it may urge banks to implement further safeguards against the risk of bad debts.
Commenting on the rise in personal debt, Alex Brazier, Financial Stability Director at the BoE, said: ‘Household debt – like most things that are good in moderation – can be dangerous in excess. Dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy.’
The number of individuals declared insolvent rose by 13% in 2016, figures from the Insolvency Service have revealed.
90,930 people in England and Wales were declared insolvent last year – a rise of 13.1% when compared to insolvency figures from 2015.
However, the number of bankruptcies in England and Wales fell in 2016, with a total of 14,989 bankruptcy orders being recorded – a 5.4% decrease when compared to 2015.
Meanwhile, in Scotland, which utilises an alternative insolvency service, personal insolvencies rose by 7.9% during the final three months of last year.
The data also revealed that around 16,502 English and Welsh businesses entered insolvency in 2016, marking a 12.6% rise when compared to 2015.
Sarah Albon, Chief Executive of the Insolvency Service, commented: ‘Personal insolvencies increased last year for the first time since 2010, however the total was still the second lowest number in the last 11 years. It is very distressing to live with unsustainable personal debt so it is important for people to seek advice.’
A new report by the Trades Union Congress (TUC) has revealed that household debt rose sharply over 2016, with total unsecured debt (that is, debt other than mortgages) reaching a record level of £349 billion during the third quarter of the year.
The TUC’s analysis, which is based on figures from the Office for National Statistics (ONS), also found that:
- unsecured debt per household rose to £12,887 in the third quarter of 2016, which is up £1,117 on a year earlier – representing the highest annual increase since at least 1997
- unsecured debt as a share of household income now stands at 27.4% – the highest for eight years.
The TUC claims that weak wage growth has meant that more families are reliant on borrowing to support their living standards. General Secretary, Frances O’Grady, said: ‘These increases in household debt are a warning that families are struggling to get by on their pay alone. Unless the government does more for working people, they could end the New Year poorer than they start it.’
However, Bank of England officials have indicated that they are not unduly concerned about current debt levels. Andy Haldane, the Bank’s chief economist, said: ‘Interest rates are still very low, and are expected to remain so for the foreseeable future, so there are fewer concerns on debt servicing than there were in the past.
‘There are reasons not to be too alarmed about it ticking up, but it is absolutely something we will watch carefully.’
UK businesses owe HM Revenue & Customs (HMRC) a total of £1.8 billion in late corporation tax payments, research from financial supermarket Funding Options has revealed.
The value of corporation tax payments in arrears has risen from £1.59 billion to £1.82 billion, according to Funding Options’ research. This represents an increase of 15% over the past year.
The online business finance supermarket also warned that HMRC is using ‘increasingly aggressive methods’ to recover overdue tax.
These methods include issuing late payment penalties, sending debt collectors to business premises and seizing assets. Funding Options warns that such measures may have ‘serious negative repercussions’ for businesses.
Conrad Ford, CEO of Funding Options, commented: ‘These figures demonstrate the growing pressure on cashflow for companies, which could get worse following the outcome of the EU referendum. Companies might want to explore in detail alternative finance options available to them before HMRC comes knocking on their door.
‘Businesses need to make sure they have the adequate funding to pay tax bills on time, without taking capital from other areas of the business.’
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The Small Business Minister, Anna Soubry, has announced plans to appoint a special commissioner to tackle late payment culture.
Small firms would be able to seek advice from the commissioner, and make complaints, when faced with the financial pressures of waiting to be paid. Current estimates put the total amount owed to small firms at £26 billion, causing millions of pounds in debt recovery costs.
In the Enterprise Bill, the Government said that a commissioner would be first contact for businesses to seek advice and support, as well as offering mediation services and investigating complaints.
The Small Business, Enterprise and Employment Act 2015 made it clear that companies which regularly fail to make payments on time will be ‘named and shamed’.
Ms Soubry said: ‘The Government is backing small businesses to grow and create more jobs and opportunity’.
She continued: ‘The small business commissioner will tackle the imbalance of bargaining power between small suppliers and large customers, and encourage them to get round the table and sort out disputes at a fraction of the cost of going to court, It will also provide advice, investigate complaints and see where further action is needed to clamp down on unfair practices’.