Bankrupt Britain

New figures published today by The Insolvency Service reveal that just three months into 2008 and 25,264 people have already fallen victim to the insolvency epidemic with 9,614 IVAs and 15,651 bankruptcies reported. According to price comparison and switching service uSwitch.com, individual insolvencies could reach 103,659 by the end of the year.

For these people, insolvency means they have already reached financial stalemate. For others, the current economic climate in the UK is quickly pushing them towards this fate. Today alone, a further 292 people will fall victim to insolvency today and 74 homes will be repossessed. Consumer debt has now reached a staggering £1.4 trillion, a figure that is increasing by £1 million every five minutes, so it's no surprise that consumers are struggling to make ends meet.

The credit crunch is not the only problem facing consumers. The cost of living has shot up by 9%, more than double the average salary increase of just 3.4% across the UK, which leads to 5 million consumers spending more than they earn every month. Consumers are facing prices hikes from every angle with annual energy bills (up 13% or £1,114), food (up 11% or £324 a year) and mortgages (up 9% or £1,020 a year) and most recently petrol prices up by 25% to 109.8p per litre.

Ann Robinson, Director of Consumer Policy at price comparison and switching service uSwitch.com, says: "It's worrying that so many people are resorting to individual insolvencies, be it an IVA or bankruptcy, to resolve their personal debt problems. These measure should always be the last resort for anyone with financial problems as they have a very serious impact on people's credit histories and their ability to borrow in the future. In the case of bankruptcy, it could also impact on employment prospects.

"At the moment, consumers are being hit from every angle with price hikes across all areas from energy to mortgages right down to a 25% increase in the cost of petrol. This may be making many people feel that their finances are simply out of control. If people find themselves in financial difficulty the worst thing they can do is ignore the problem and hope it goes away. It won't. Banks have a duty to help people in financial hardship and free debt advice is readily available from organisations such as the Consumer Credit Counselling Service, National Debtline and Citizen's Advice. I would strongly urge people to start taking action before they reach financial breaking point."

uSwitch.com's debt advice centre can give consumers a helping hand on budget management, how to best prioritise financial commitments and guidance as to the options best suited to their situation.