The Debt Advice Foundation warns that the country is currently experiencing the ‘calm before the storm’ and predicts that the number of people facing insolvency could rocket by 20 per cent following the outcome of the government’s spending review.
With speculation that 500,000 public sector jobs could be lost by 2014, the charity said that although personal insolvency figures have now fallen for the second consecutive quarter, the country is still sitting on a financial time bomb.
Recent insolvency statistics from the Insolvency Service show that there were 33,935 individual insolvencies in England and Wales in the third quarter of 2010. This was a decrease of 3.7 per cent on the same period a year ago.
David Rodger, managing director of Debt Advice Foundation, said: “Although 2010 has seen a reduction in the number of people becoming insolvent, the prospect of half a million public sector jobs being cut with little hope of the private sector picking up the slack, unfortunately means that the worst could be yet to come.”
Last year saw the highest number of personal insolvencies on record and despite the current reprieve; the potential job losses could push insolvency to an all-time high.
Rodger added: “Although insolvency volumes are the product of a number of contributory factors, unemployment, particularly new unemployment, is a key determinant.
If the predicted spending cuts go ahead we could see insolvencies rise to in excess of 40,000 per quarter, which is 20 per cent higher than present levels.”