Clearly many individuals are finding it hard to cope with rising prices, low wages and ongoing austerity given the latest personal insolvency figures published by the Insolvency Service this week.
Personal insolvencies in 2018 totalled 115,299, a 16.2% rise on 2017 and the highest level since 2011, according to the Insolvency Service. The majority of these were IVAs (Individual Voluntary Arrangements) which hit 71,034, a record level and an increase of 19.9% on 2017.
Company insolvencies also continued to rise; at 16,090 in 2018 they were their highest level since 2014. The majority, 63.9%, were CVLs (Creditors Voluntary Liquidations).
The top three business sectors for insolvencies were construction, wholesale and retail trade, accommodation and food services.
What does the rise in personal insolvencies mean for SMEs?
The knock on effect of personal insolvencies is consumers reining back on their spending, as they have clearly been doing for some time and most noticeably for retail over the Christmas period. Other types of business will also be impacted.
Given the dire warnings about prices depending on the outcome of Brexit, consumers’ confidence is looking unlikely to improve any time soon. This is not helped by the week’s announcement by Tesco of a possible cut of 9,000 jobs and worries in parts of the country about the future of employment such as in the automotive industry and for SMEs within its supply chain.
It is also likely that the changes in retailing will continue with more High Street shops closing.
For SMEs, especially those dependent on consumer spending, the likelihood is that they will have to not only scrupulously manage their cash flow and planning but also ensure their invoices are paid on time. They may also be well advised to strengthen their marketing initiatives and those “extra services” that serve small, independent businesses so well by retaining loyal customers.
In these difficult circumstances, to borrow a well-known phrase, “every little helps”.