Insolvency in Transition: What Today’s Trends Reveal About the Financial Health of the UK Consumer 

By Leo Petais, Director of New Business – Insolvency, Creditor Services and Collections

The story of personal insolvency in the UK goes beyond mere financial hardship. It acts as a barometer of our economic environment, consumer confidence, and the effectiveness of policy interventions. With insolvency volumes influenced by factors ranging from macroeconomic shocks to regulatory reforms, comprehending the trends and their implications is crucial for both creditors and consumers alike. 

As we progress through 2025, the data provides a revealing lens into not only the volume of insolvencies but also the evolving profile of the individuals behind the statistics. 

A Look Back: How Insolvency Volumes Have Evolved 

Insolvency volumes in the UK have been anything but stable over the past two decades. The credit crunch triggered a sharp rise in insolvencies as access to credit evaporated and unemployment surged. Between 2010 and 2015, however, volumes began to decline as the economy slowly recovered, credit availability improved, and consumer resilience strengthened. 

But that downward trend didn’t last. The 2016 Brexit referendum sparked fresh economic uncertainty. The pound plunged, inflation rose due to increased import costs, and public spending cuts added pressure to already stretched households. Unsurprisingly, insolvency volumes began to climb once more. 

Then came the COVID-19 pandemic. Logically, one might have expected insolvency numbers to skyrocket—after all, the UK endured its worst recession in 300 years. Yet, counterintuitively, volumes fell. Why? Because of swift, coordinated creditor support and government measures that effectively shielded thousands from severe financial distress. 

However, this cooperation was tested again during the cost-of-living crisis. A combination of war-driven energy shocks, inflation reaching 11%, and rising interest rates meant that many consumers, particularly those already vulnerable, began to struggle once more. Insolvency volumes rose again. 

Fast forward to 2024–25, and although the Bank of England has taken steps to stimulate the economy by lowering interest rates, rising utility bills and wage pressures remain a significant concern. Meanwhile, voluntary business closures are at their highest since the pandemic, and nearly half of firms with 10 or more employees report labour costs as a major issue affecting turnover. While these pressures may not immediately manifest in insolvency numbers, they will inevitably have an impact. 

The Changing Face of the Insolvent Consumer 

Age: Who’s Falling into Insolvency? 

Data consistently shows that individuals aged 35 to 44 account for the highest number of insolvencies. This life stage is often marked by competing demands, including raising children, supporting elderly parents, servicing mortgages or credit, and a lack of savings buffers, which make individuals less resilient to any income shock. Conversely, those under 24 account for the fewest insolvencies. However, with around 100,000 young people becoming insolvent, the figures remain striking. Their shorter credit history often results in lower liabilities, making them less likely to enter bankruptcy or a Debt Relief Order (DRO)—but this trend still highlights the need for improved financial education from an early age.  

Interestingly, 2025 is witnessing an increase in insolvencies among individuals over the age of 55. For many in this cohort, particularly those who are retired, sharp rises in energy bills or mortgage costs can be particularly burdensome, especially if they are living on fixed incomes. 

Gender: A Subtle but Telling Divide 

While insolvency rates are generally similar across genders, a slightly higher proportion of women have entered insolvency proceedings in recent years, particularly between 2015 and 2023. These cases typically involve lower average liabilities, likely reflecting the gender pay gap and possibly an earlier willingness to seek assistance.  

This also serves as a reminder of the need to address financial vulnerability linked to abuse or inequality, as well as the industry’s responsibility to support women facing hidden financial challenges. 

Legislation and Industry Shifts: The Story Behind the Numbers 

The composition of insolvency types has also changed. In the early 2000s, bankruptcies dominated the economy. However, from 2006 onwards, Individual Voluntary Arrangements (IVAs) experienced a surge, driven by the rise of large, national IVA providers and, subsequently, by increased marketing and debt packager networks. 

By 2019, IVAs had ballooned, fuelled more by business incentives than by consumer needs. However, this has changed once more. In 2023, the ban on debt packagers led to a sharp decline in IVA volumes, while Debt Relief Orders (DROs) increased, partly due to legislative changes that made them more accessible. 

Average liabilities per case have also increased again over the past two years, reversing a decade-long trend and returning to 2019 levels, reflecting stricter regulation and improved targeting of insolvency options. 

Another notable shift is in the type of creditors included in insolvency cases. The “Big Six” banks now represent a smaller share of debts in IVAs. This may indicate improved early engagement by major creditors or a broader shift among consumers towards challenger banks, whose presence in insolvency cases has surged by 300% over the past five years. 

What It Means for Creditors and Consumers 

These trends carry significant implications. For creditors, the decline in dividend rates over the past decade reflects a combination of decreasing affordability and liabilities alongside rising financial pressure on consumers. However, in a positive development, dividend rates rose in 2023 and have since remained steady, suggesting that the removal of debt packagers may be improving case quality. The introduction of fixed fees could further reduce IVA breakage rates, although the full effect has yet to be realised. 

For consumers, the increasing age and complexity of insolvency cases highlight the need for personalised, transparent, and sustainable debt solutions. A one-size-fits-all approach is no longer viable. Whether through early intervention, more flexible repayment options, or holistic affordability assessments, the aim must be to prevent repeat distress and promote long-term financial recovery. 

Turning Insight into Impact: What Comes Next? 

While economic shocks may dictate the scale of insolvency volumes, it is policy, industry behaviour, and demographic shifts that determine their nature. In today’s landscape, we observe older consumers facing new pressures, gendered patterns of vulnerability, and a market still adjusting to regulatory reform. 

For creditors and insolvency professionals, this isn’t just an opportunity to respond; it’s a moment to take the lead. By recognising these deeper trends, we can create fairer, more resilient systems that serve both financial institutions and the individuals they support.