Financial stress among millennials soars - but drops among baby boomers

As featured in City AM 29.10.18

20% rise in insolvencies amongst millennials comes as insolvencies among baby boomers falls 10% as wealth gap widens.

The last three years have seen the number of insolvencies among millennials soar, while insolvencies have dropped among baby boomers.

The number of new insolvencies of under 25s rose 20% to 5,650 in 2017, up from 4,710 in 2016, while new insolvencies of over 65s fell 10% to 4,580 in 2017 from 5,050 the previous year.*

The rise in the number of insolvencies among millennials comes as the relative wealth gap widens between the millennial and baby boomer generation, in part due to house price inflation.

As a result of rising property prices, millennials often spend a much larger proportion of their salary on rental and mortgage payments. This means they have little left to act as a cash cushion to prevent them becoming insolvent if they suffer a shock to their earnings, such as losing their job.

However, baby boomers are not only more likely to be spending proportionately less on housing, but can also extract equity from their property in case of an emergency, such as a job loss or illness. This means they are less likely to fall into insolvency as they can access funds during unforeseen circumstances.

In addition, since the recession started in 2008, millennials have had to take on increasingly unsustainable levels of debt to get onto the property ladder at all. Recent ONS figures show that just 4% of the UK’s net property wealth was held by under 25s, while over 65s held 41%.**

4.3 in 10,000 over 65s and 9.6 in 10,000 under 25s went insolvent in 2017 – making it more than twice as likely that a millennial will go insolvent as a baby boomer.

Jeremy Willmont, Head of Restructuring & insolvency, says: “More millennials are falling into debt as they have to spend high proportions of their income on housing.

“In addition to high rents and mortgage repayment costs, millennials can often find it difficult to save significant amounts. Millennials are at risk of falling into debt through using credit cards and loans to cover living costs such as buying and maintaining a car, which can easily be set up without taking financial advice.

“The rates that millennials are going insolvent is very worrying, and the problem is worsening. Millennials have more than twice as much of a chance of insolvency than baby boomers; this is a major cause for concern.”

Number or insolvencies dropping considerably among baby boomers, and soaring among millennials in just a year

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*Insolvency Service statistics, October 2018
** Distribution of aggregate household total wealth, March 2018, ONS

For more information on how we can support you with business rescue & insolvency solutions, please contact Jeremy Wilmont. 
 

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