Full 20% of UK Citizens in Debt for Basic Living Costs

In what comes as a shock to many living today in the United Kingdom, recent research has shown that a full 1 in 5 UK citizens are finding that they are sliding deeper into debt covering their basic necessities instead of by blowing cash on unneeded things. Nearly 50% of those polled also said that they feel even worse about their finances now that they ever had at any previous point in their lives. This paints a very gloomy portrait of life in the UK even after the supposed global recession is supposed to be backing away from not just UK shores, but fading into the distance for the rest of the world, as well.

The consumer activities study was an attempt to measure the attitudes of today’s consumers in the UK and part of what the government wanted to know for the upcoming Emergency Budget. Not only are 18% of UK adults having to battle just to survive, another 14% are struggling with repayments that are difficult for them to try and make on any sort of regular basis. These are ominous times mostly because the debt is getting more expensive. Those not already in a Debt Management Program are struggling to find a way out, battling bank overdrafts, personal loan payments and even credit cards as the interest levels continue to punish their efforts to free themselves from debt. The Bank of England may have a low rate of only half a per cent right now, a truly historic low, but this does not mean that the cost of borrowing for the average consumer has gone down at all.

On top of this, job security is a dark shadow in the minds of a great number of people, making them stress out even more over what they might be able to do to try and have a secure future. The full 2 and a half million unemployed UK citizens does not bode well for those who are seeking a job. These unstable times have been getting worse with a sharp rise in the last 2 months alone, but the public sector will be laying off workers and this means even more jobs will be lost.

With half of the UK’s work force experiencing a freeze in their pay and another 20% expressing doubts about their own current job’s security, the economy is not living up to the hopes of many. Wages are not getting anywhere close to keeping pace with the levels of inflation and this continues to punish anyone with even the slightest bit of debt hanging over their heads.

If the dreaded VAT does end up rising, the cost of living will be even higher and many consumers fear exactly this, according to the recent study. After considering the possiblity that Chancellor George Osborne’s choice may be to increase the VAT, many worry that it could be very tough for them after this. Reserve cash pools are already being tapped by most UK households and this does not bode well for their ability to survive any economic dips that are almost certain to hit eventually.

Even debt charities in the UK are finding themselves underfunded and unable to help many, turning them away and causing a lot of people to be confused where they need to look next. Trying to stay afloat over the long term is certainly easier with an IVA, say most experts, simply due to the fact that short term solutions are usually what got most consumers into the tangle they find themselves in today.

Personal Insolvency in the UK is on the Rise

In the last quarter of 2009, England and Wales saw the number of people that were declared insolvent each its highest number of all time. The Insolvency service has released figures that show that more than 35,000 people had to declare insolvency in the final three months of the calendar year, which is a staggering increase of 25% from the year before. On top of that, more than 6,355 businesses were forced to declare bankruptcy in the same time period which was also a record.

For the entire year of 2009 there were over 134,000 that were declared insolvent in the UK which was a 26% increase from the year before and almost 30,000 more than the previous record which was seen in 2006.

Many people thought that record low interest rates would have saved a lot of people from being declared as insolvent, but the increase of long term unemployment just meant that some people did not have the chance to fight back and compile enough money to pay off their debts. Due to these new increases many creditors have tightened the reins on consumers and started to act a lot tougher. The increase in toughness by creditors could have a lot to do with the increase in individual voluntary agreements, but the increase in the last few months of the year was surprising as usually people wait until after Christmas to deal with their debt issues.

IVAs may also have risen as more people seem to be aware of their options and want to pay back some debt rather than go bankrupt. No matter how you look at, most people agree that there is a lot more to come for UK consumers before things get better and we actually find a way to climb out of the recession.

Bad Debts on the Rise

The Bank of England is pointing out that the number of bad debts that were defaulted on by consumers has increased by an alarming rate through 2009. Financial institutions were forced to write off over 4 billion pounds in bad debt as many consumers declared bankruptcy or find an individual voluntary agreement that ensured they would not be paying back all of their debt. The previous highest number in that category was 3.2 billion pounds that was written off in 2008, so the increase of close to 1 billion pounds has many in the credit industry worried.

More than twice as many mortgages were written off than usual and that combined with personal loans and credit means that the total amount of write-offs for the year reached as much as 9.3 billion pounds.

The effect of this increase in bad debt is being felt most by borrowers that are known for making all of their payments on time. Credit card interest rates are on the rise meaning people are being faced to pay larger monthly payments and new homeowners are having to jump through all kinds of hoops to ensure they meet the criteria and standards of lenders.

It is a sad truth that the most on time of borrowers have to feel the effects for the people that had to declare bankruptcy, but that is the sad truth about the economy at this moment. If interest rates continue to rise then consumers are going to have to learn to live without borrowing, and simply spend what they have at the moment in order to avoid substantial monthly payments on their credit card debt.

That is, unless the government or credit industry can step in and proposes policies or solutions to protect themselves and consumers as we all try to work our way out of this dire economic situation.

Debt from Utilities Excluding People Financially

Debt and the issues that surround it have come to the forefront of the UK over the past year or so, and although things have improved in many ways there are still a number of problems that citizens are facing. One new problem is the creation of utility debt that is driving a wedge between lower and upper class citizens. More and more citizens are foregoing on payments or having to borrow more money, from a system that cannot afford to lend any more money.

Recent studies done by a number of agencies, and especially Citizens Advice, noted and announced that people who are unable to pay their utilities each month are spiralling into insurmountable debt that could lead to major problems down the road. While a few politicians and people of influence have stated that they are on the path towards a debt-free Britain, announcements like this tell us how far we just may be from such a positive future.

The Bank of England recently discovered that net lending to individuals in Britain had reached an exasperating figure of 2 billion pounds in January of this year, and is continuing to be on the rise. They also calculated that on average, every adult in the UK owes close to 30,000 pounds, which is more than 129 percent of the median wage in the country. More and more citizens continue to seek help from debt management programs and IVA’s.

With utility prices going up, and debt continuing to rise, something or someone needs to step in if Britain wants to find a way to be debt-free. If people cannot pay their utility bills then that is just a small sign of other problems that must be on the rise due to the economy. Britain will continue into the next 5 or 10 years with quite a bit of debt yet individual lending continues to rise, so there does not seem to be an end in sight.

Record for Personal Insolvency Broken in England and Wales

According to the government’s Insolvency Service, over 33,000 personal insolvencies occured during the second quarter of 2009, breaking all previous records for England and Wales. The increase demonstrates a 9% rise over the first quarter of 2009 and is 27% higher than the same period in 2008. Many of these individuals are finding some relief in either IVAs or, in more extreme situations, they are seeking a Bankruptcy.

Although the number of companies experiencing insolvency has decreased by 14% compared to the first quarter of 2009, it remains 23% higher than the same period in 2008.

Since the end of 2007, personal insolvencies have been soaring due to the recession and its financial implications on the budgets of average people. During the final quarter of 2007, well over 23,000 people went bust but today the number of people experiencing the same situation has increased by almost 40%. Bankruptcies accounted for over 18,800 of the overall 33,000 plus personal insolvencies which is lower than in the past, but Individual Voluntary Arrangements rose to take up 12,225 of that overall number of insolvencies.

For the second consecutive quarter, the number of companies going through administration, voluntary arragements or receiverships decreased, but experts warn that this trend may not continue into the future.

Credit Card Cheques Expected to Face Serious Opposition from UK Government

A new post is being created to help consumers recoup losses from unwanted credit card cheques which have become such a huge problem in the UK in recent years. The cheques are from rogue traders and are expected to be banned in the near future, as well, due to the amount of debt they add to the already staggering debt problem in the UK that has seen so many turning to Individual Voluntary Arrangements and Bankruptcy.

According to the latest figures coming out of the Bank of England, UK citizens owe loans, credit card debt and overdrafts that total to £233bn.

However, the reaction to the current plans to create a Consumer Advocate are mixed, though the White Paper on its creation outlines the Advocate as a means to raise awareness about the severity of current consumer struggles. It would also act on behalf of groups of the public who are seeking refunds or compensation when the case is judged to be of “national importance”, such as against a substantial and unfair debt from a rogue company.

The government is looking for action to be taking in regard to debt levels during this current recession. They want lenders to be held more accountable for irresponsible practices within their industry because UK credit card debt is again standing at £54.4bn after having been reduced for a short time, months ago.

Credit card cheques have proven to be quite controversial because of the handling fees incurred for using them. These blank cheques are often sent to credit card holders along with their monthly statements as a means of enabling the customer with a different way to spend the funds from their card’s account. If things go awry, these cheques do not offer the same protections as the cards themselves and they almost always do not have an interest free period that the card does, leading to confusion for consumers and thus, increased spending.

Since the government has been expected to ban these cheques for some time now, they will be banning them in order to halt companies from sending unsolicited cheques. This means credit card companies may only offer these to those who have opted in to receive them ahead of time rather than eliminating the option to consumers altogether.

This news follows the announcement from Uswitch, a price comparison website, that states 20% of UK consumers have seen their credit limits rise without asking for such an increase.

Consumer groups have been requesting that there be more help for consumers who believe they have been unfairly treated by companies and as a result, experienced significant financial loss.

The person who will be the Consumer Avocate in the coming year will be an individual comfortable with being involved in representing substantial groups of consumers who seek compensation through the courts and also highly public consumer campaigns. These consumers who feel they have been ripped off will be able to perform group actions against the company named by opting in to the group legal action.

Retail Sales Surge in June

According to official figures, after a pronounced drop of sales in UK shops during May, sales shot up 1.2% in June. This most likely comes because of an increase in summer clothing purchases as the public attempt to deal with the hot weather of this season.

According to the Office for National Statistics (ONS), sales rose 2.9% during June of 2008. In an effort to encourage consumers to spend, shops have pushed their summer sales forward and this has combined nicely with the heatwave to trigger additional purchases.

Although economists had expected a 0.3% rise in retail this June after a drop of 0.9% this May, it appears that sales in retail are in fact quite healthy.

Clothing retailer Next said that the fortunate weather had boosted its sales to an extent that they felt comfortable raising their profit forecast.

Of course, all of this comes thanks to the easy access that consumers have to store cards and other forms of personal credit, so there could be a rise in individual debt following not far behind.

Some analysts believe that this impressive improvement in retail sales figures supports the notion that the worst of this current recession is now over.

It is expected that the Economic growth figures due Friday will show that the overall UK economy shrank by 0.4% from April to June of 2009. Compared to the 2.4% contraction for the same period of time in 2008, this is certainly an improvement. Yet, analysts insist that retail sales are mercurial and that UK households will most likely continue to struggle economically.

According to the ONS, textile, clothing and footwear sales in retail stores rose 11.3% compared to 2008, yet there was a decline in big-ticket household items sales, as well.

Debt in the UK stands at Double the Average of Europe

The debt capital of Europe is now, unfortunately, Britain. UK citizens are borrowing an average of nearly twice what those in other western European countries borrow.

Credit cards and other unsecured UK debts stood at £216bn in 2005 alone. That is over a third of the total borrowing in Europe for all forms of debt except mortgages. This means that, according to the Datamonitor research firm, the average resident of the UK owes £3,175 and the total personal debt of the UK stands at £1.2 trillion, including mortgages.

According to this report on the market in 16 European nations for borrowing through hire purchases, credit cards, personal loans and overdrafts, the UK has quite the gluttonous appetite when it comes to credit. Compared to the UK average of £3,175 the average European owed unsecured debts of only £1,558.

These numbers are due mostly to the skyrocketing levels of borrowing that have been reached over the last ten years in the UK. Most of this new debt has been created with the aid of credit cards. Compared to most European countries, the British are far more comfortable taking on credit card debt.

Outstanding credit card balances have risesn by over 380% since 1994 according to figures from the Bank of England. While credit card debt may not be difficult for many people to repay, for those facing large debts it can be incredibly difficult to deal with. This is why so many people are turning to Individual Voluntary Arrangements (IVA), debt management plans and even bankruptcy in more severe cases.

The French trailed closely behind the UK in terms of new lending last year while the Germans came in second in terms of the amount of debt currently outstanding. Even though the lending market is overshadowed by the largest economies, smaller economies like those in Greece and Turkey saw the fastest rising levels of borrowing that didn’t include mortgages. Although it went through a 2001 economic crisis, Turkey saw new lending shoot up by 52% between that year and 2005. Greece, during this same time period, saw its debt from unsecured borrowing increase by 29%. Both countries have the fastest levels of outstanding consumer debts out of all 16 countries.

In the case of Turkey, there is barely a mortgage market and that means most borrowing is in the form of credit cards or other unsecured debts. In Holland, the situation is very different and there only 5% of all debt is unsecured because people typically expand their mortgages in order to buy things.

UK Public Warned Loan Sharks May Make a Come Back

As lenders become more cautious about their lending, increasingly larger numbers of UK citizens grow more susceptible to using loan sharks as the recession continues. A report from government think tank New Local Government Network estimated that this caution from standard lenders would lead an additional 35,000 people to turn to illegal money lending operations. They selected Manchester, Gatehead, Lincoln and Stoke as places most likely to be attractive targets for loan sharks.

The group suggested that councils should invest more funds into credit unions. They also stated their research indicates that a minimum of 165,000 UK citizens have already used loan sharks and paid incredibly high rates of interest as a result.

Those struggling with debt would be wise to consider the advantages of an IVA or Debt Management Plan which can help reduce the overall debt and end the viscious spiral of interest-fueled debt growth.

Debt for Police Officers

Research as shown us that theses may be some valuable suggestions for managing officers who are experiencing financial difficulties so we created this article to share these suggestions for Forces within the UK who are managing officers who have fallen into such financial troubles. This is in no way meant to be interpreted as a prescriptive document or official financial advice.

While each case should definitely be dealt with based on the unique criteria of that situation, some basic suggestions could provide some uniformity and additional clarity to those who deal with these issues.

According to research, more officers than in prior years are now going through financial difficulties for a wide variety of reasons. Relative pay levels for officers fluctuate at a near constant rate and at the same time, financial institutions are eager to enter into credit agreements with officers. This can even be the case in situations where they would not have done the same for a member of the public who was in a different line of work and in the same circumstances.

How to Determine When an Officer is in Financial Difficulty

Circumstances for each officer will be very different depending upon factors such as: the earning ability of their domestic partner if they have one, children involved in their relationships and how well they are able to manage their own debts. Considering these facts, then we will define ‘financial difficulty’ as:

A situation in which an officer has little or no chance in the near future of being able to meet their current debt.

It is important that Forces are aware that officers who have fallen into financial difficulty are usually in one of three primary situations:

Those officers going through marital troubles

Those officers who have experienced a change in their family’s or their own financial situations

Those recruits who now have unmanageable debts

In many instances a Debt Management Plan or an IVA (Individual Voluntary Arrangement) may be a solution you could advise such officers to look into. It’s always best to intervene early if you can and help them solve their situation before it ever becomes dire.