Continued rise in 18-25 year-olds entering formal insolvency procedures

RSM is predicting that official figures, due to be published next Wednesday (30 October 2019), will show a 9 per cent rise in personal insolvency rates in England and Wales in quarter three when compared to the same quarter last year.

The data from Tracker, RSM's award winning early online warning system, predicts that total insolvencies for the quarter will reach around 31,000 cases, comprising 4,200 bankruptcies, around 20,000 Individual Voluntary Arrangements (IVAs), and 6,800 Debt Relief Orders (DROs).

The latest numbers from RSM's Tracker database also reveal that since early 2016, there has been a continuous rise in the number of young people entering a formal insolvency process. 

This quarter we expect to see a marked increase in young people between 18 and 25 entering into an insolvency process – an uplift of 8 per cent since last quarter. This continues the incremental rise since the first quarter of 2016, when only 208 young people entered a formal insolvency process; which now sits at over 2,132 (see below graph). 

Number of 18-25 year olds entering a formal personal insolvency process
Source: RSM's Tracker database

Alec Pillmoor, a personal insolvency partner at RSM said:

'The projected figures for Q3 show another increase in the levels of personal insolvencies when compared to the same quarter last year, showing that many people are still struggling to manage debt and make payments on time. 

‘This becomes particularly worrying when we look at the continued increase of insolvencies affecting 18-25 year olds. 

‘With access to low interest rates and many ways to access credit, it could be that young people are tempted by ‘easy money’ to fulfil a certain lifestyle, but pressure is compounded by more flexible or adhoc working patterns – making it harder to plan payments effectively. Also, in an uncertain financial landscape, macro influences could affect interest rates further impacting this demographic.  

'There has been a call from a policy group for banks to analyse personal financial data to identify high risk individuals and offer support to anyone who is struggling to meet their financial commitments each month. 

‘In fact, a debt charity has revealed that one in three UK consumers are expecting their finances to get worse in 2020, so we could see these trends continuing into the New Year and beyond.’

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