Researchers found that as many as 185,000 people are struggling with debt problems and money worries in the current economic climate. Even more worryingly, however, they found over 70,000 young people (those aged between 16 and 24) who may soon be facing financial hardship as they struggle to find work or have been out of work for an extended period.

Joanna Elson OBE, who is the chief executive of the charity, spoke to the Think Money website about the self-perpetuating problem of debt problems and unemployment in the UK. She said:

“Becoming unemployed is often the trigger for debt problems. Increasing levels of unemployment will undoubtedly bring greater financial hardship to homes across the UK.

“The figures show that in the three months running up to August 114,000 more people became unemployed. That’s 114,000 people for whom paying each bill that falls through the letterbox has suddenly become a desperate challenge.”

Recent figures have also been released by the Office for National Statistics (ONS) which suggest that unemployment is at its highest rate for 17 years. This could mean that the increasingly desperate situation faced by people who already have debt problems will not improve any time soon, unless they seek proper, reliable debt advice as soon as possible.

The report, which was entitled ‘The Debt and Generations Report’ and was produced by the think-tank known as the Financial Inclusion Centre, showed that as many as one million households containing young people aged 18 to 39 are struggling to cope with their debt problems. Researchers also identified a further 893,000 who could be “at risk” of developing debt management problems in the near future.

It was also found that the age at which debt levels tend to peak for most people is changing. In the past, it was around 40 years old, but consumers are now building up debt problems at a much younger age. At present, almost 75 per cent of people aged between 18 and 39 have unsecured debt problems, whilst for the 40 to 54 age group, this figure is just 60 per cent.

Due to falling income levels and rising house prices, younger people are finding it more difficult to build up assets in the same that their parents did. House prices rose from 2.3 times gross earnings to 5.5 between 1997 and 2007, and many young first-time buyers are now having to seek financial help from their parents if they want to get on the property ladder.

Patricia Rose Parrott stole a total of £184,000 from the firm she worked for, Teesside Fluid Systems, over a period of five years. The 58-year-old’s reason for doing so was apparently mounting debt problems, which she had inherited when her husband died 18 years previously. Since then, she had been struggling to make interest repayments and had a mountain of personal debt problems.

Parrott, who had been a loyal employee for 32 years, was able to commit the theft due to her position as a financial controller for the firm, which is based in Newton Aycliffe in County Durham. She was able to use her knowledge of the company’s payments system to siphon money into her own bank account. In total, from January 2006 to January 2011, she made out 169 cheques to herself.

The former credit controller was only caught when company co-director Joanne Waller stood in for Parrott during a three-day absence last January, and noticed discrepancies in the payments system. The company is now doing everything possible to recover some of the cash from Parrott.

Parrott has been sentenced to a 21-month prison term after admitting a single theft charge. As she was sentenced, recorder Eric Elliott told her:

“It was calculated and deliberate dishonesty.

“You took advantage of your powerful position as financial controller to disguise that dishonesty for five years.

“There’s no doubt it would have damaging effects on the company.”

Researchers from Lloyds bank conducted a survey of its current account customers, to work out how much they were spending each month compared to their income. What they found was quite worrying, as 10 per cent were not bringing in enough to cover living expenses such as rent and mortgage payments, food shopping, energy and utility bills etc.

A financial solutions professional from Think Money commented on the situation and offered some advice for those in need of debt help:

“It’s worrying that 10% of people should be struggling with their finances in general, let alone find themselves unable to meet their monthly outgoings. It’s clear that many of those people will be falling into arrears or getting into debt just trying to make ends meet.

“There are things people can do to ease some of the pressure on their finances. Careful budgeting is essential, and some may find switching utility providers or cutting back on luxuries can free up some much-needed cash.”

Lloyds also found that whilst household incomes have, on face value, increased by as much as 3.5 per cent over the last year, it has fallen by an average of 1 per cent in real terms. This is partially due to inflation, which at its current high level has reduced households’ spending power.

Earlier this month, the accountancy and advisory firm RSM Tenon published figures showing that female bankruptcy figures for women aged 18 to 35 have overtaken those of men for the very first time. As many as 14,827 went bankrupt in the second quarter of this year and as it stands, women now account for a total of 48 per cent of all personal insolvencies, a figure that has never been so high.

Mark Sands, who is head of personal insolvency at RSM Tenon, said that a number of things could be to blame for this unexpected rise in personal bankruptcy figures for women. However, he accused bankrupt reality TV stars such as Kerry Katona for inspiring more women than ever before to let themselves go bankrupt through reckless spending and poor money management.

Mr Sands said:

“People blame female money troubles on almost everything from a culture of consumption to alleged ‘bankruptcy role models’ such as Kerry Katona.

“Spending habits and attitudes to debt have changed over the past generation at the same time that women have achieved ever greater levels of financial independence.

“As women become more and more independent, lenders see them as a more and more lucrative market.

“There’s an element of truth that the offer of buying handbags with pricey store cards is sending more and more women bust.”

The research was carried out by The Institute of Fiscal Studies (IFS), which published a report comparing living standards in Britain with those in other countries. The research focused on standards before the recession and those of the present day.

It was found that the actual contraction of the economy was around six percent during this time, which was considered to be mid-range compared to what it could have been if the government had not taken action to limit the impact of the recession. However, the IFS researchers concluded that this action had “delayed rather than avoided” the true and rather painful impact of the recession on household incomes and the economy as a whole.

Researchers predicted that consumers will see real incomes continue to fall until at least the 2013/14 financial year. The decline for the last financial year was recorded as being 3.5 per cent, which is the biggest drop since 1981.

Robert Joyce, a research economist at IFS, said:

“As in other developed countries, the most severe consequences of the recession on UK living standards have only just begun to be felt and will continue to be felt for years to come.”

The data gathered by the charity shows that there were 230 more enquiries in the first three months of the financial year compared to the previous year. Compared to the 641 enquiries made in the first few months of 2010, the CAB recorded 871 this year.

The number of people with housing enquiries, including people who either needed help with homelessness or who were facing eviction or repossession, rose sharply in the first quarter of the year.

Also evident in the charity’s research on Oxford’s financial situation for the first part of the year was a rise in the number of calls from people who were worried about employment, especially those facing redundancy or dismissal from work. For these people, being made redundant could result in serious debt problems in the future, leaving them struggling to pay their bills and make ends meet.

Gill Tishler, who is the director of the charity in its Oxford branch, commented on the situation and urged people who are experiencing financial problems to seek proper debt help as soon as possible. She said:

“There are warning signs here of stress on the housing stock in Oxford and the ongoing fragility of employment for many people.

“If you are getting into difficulties do seek advice – don’t ignore the problems as the chances are they won’t go away.”

Also included in the government-released figures is the statistic that shows that since the start of the recession back in 2007, bankruptcy rates in Dungannon, the third largest town in the county of Tyrone, have risen by as much as 69 per cent.

The Dungannon district recorded the third highest bankruptcy figures in all of Northern Ireland’s rural councils last year, with 76 cases compared to Armagh’s 62 and Cookstown’s 40. Before the start of the recession, there were only around 45 cases recorded each year.

In terms of mortgage repossession cases, Dungannon has seen an 83 per cent increase in the number of residents who face losing their homes since the start of the recession. The figure stood at just 66 in 2007, but in 2010 this number had leapt to 121.

Whilst bankruptcy levels in the rest of the UK seem to have dropped, this trend has not been seen in Northern Ireland. Across the whole of the country last year, there were 1,954 cases recorded. Overall, the personal insolvency figures show an increase of 18 per cent in the number of people either going bankrupt or choosing to use IVAs (Individual Voluntary Arrangements) compared to the same period last year.

Commenting on the situation, the chief economist at Ulster Bank, Richard Ramsey, said:

“Worryingly, these figures come before the public expenditure cuts and cuts in benefits which we can expect this financial year. All these factors are squeezing household budgets.”

Research undertaken by R3 shows that as many as 1.8 million people borrowed money to fund a trip, getaway or summer holiday this year. In particular, the 18-24-year-old age group was the most likely to take this option to pay for holidays.

However, R3 warns that taking out a loan in order to go on holiday could result in severe debt management problems when people return home again. The chief executive of the insolvency body, Frances Coulson, explained:

“For those who have borrowed to pay for their holiday they should be aware of the high interest rates that may be charged.

“R3 members have seen an increase in the number of financial distressed individuals whose debts include loans.”

R3′s study also revealed that on the other end of the spectrum, a large number of Brits are being more careful when it comes to holiday spending. As many as 30 per cent of those surveyed had scrapped plans to take a summer holiday this year due to concern over their finances and debt problems, which is considerable increase on the 25 per cent who skipped their holidays last year.

In other results, 38 per cent of people made a concerted effort to save money whilst on holiday, either by staying in Britain or by trying to find cheaper accommodation and flights.

The Centre for Economic and Business Research (CEBR) conducted a survey recently in which 47 per cent of respondents admitted that they were forced to use their own cash to keep themselves in business this year.

Other results of the survey were just as worrying, as:

• More than 25 per cent of business owners said they had taken on credit card debt or made use of personal overdrafts in order to help their companies stay afloat
• 22 per cent relied on loans from banks or building societies
• 27 per cent were forced to ask their friends and family for debt help or other financial support
• 13 per cent took the drastic step of remortgaginwg their homes

Researchers also found that the average amount raised by any of the above means was £20,400, and that nearly 90 per cent of small business owners think that the UK is an “unbearably expensive” place to do business.

The price comparison service Make It Cheaper commissioned the research, and the company’s managing director Jonathan Elliot commented on the findings. He said:

“The effects of squeezed margins and cost increases are not only threatening businesses, but the financial security of their owners and families.

“It is extremely concerning that small business owners have been compelled to take the drastic step of placing their own financial stability in jeopardy to keep the company afloat.”

The research, which was carried out by the Financial Inclusion Centre, identified 1.1 million UK households which had less than £1,000 in savings and more worryingly, a total of 4.3 million families which had no savings at all.

The main worry for these households is if the unexpected should occur, such as one household member losing their job. Without savings for situations like this, or for any other sudden expenditure, families could find themselves facing serious debt problems.

The Department for Business, Innovation and Skills (BIS) recently found that 27 per cent of UK households with no savings risk debt management problems in the future by relying on credit for everyday spending. This was compared to just 9 per cent of households which had savings of between £1,000 and £10,000.

Frances Coulson, the president of trade body R3, which also found recently that 47 per cent of UK individuals are worried about debt problems, warned against this reliance on credit. She said:

“Households that are already struggling may find traditional lenders unwilling to provide further credit and are therefore drawn to short-term credit solutions. Individuals turning to short-term loans and credit cards should be wary of the high interest rates that often accompany these products. Overall debt can quickly snowball out of control.”

Figures released by the Council of Mortgage Lenders (CML) show that a total of 9,000 UK properties were repossessed in the three months leading up to the end of June. This was a little less than the 9,100 recorded in the first quarter of 2011.

Debt management experts believe the recent drop in repossessions was due to a relatively stable job market, as well as low interest rates and a more lenient attitude shown by banks and other lenders towards people with mortgage debt problems.

However, the CML predicts that repossessions will soon rise, and is estimating that as many as 40,000 people with serious debt problems will lose their homes this year. This is considerably more than the 36,300 people whose homes were repossessed in 2010, and it could grow even more in 2012 to 45,000 as household incomes feel the squeeze from slow wage growth, rising taxes and increased living costs.

Chris Gardner, who is the director of mortgage broker Obligo.co.uk, commented on the situation, saying:

“Lenders’ forbearance cannot last forever – and if they change their approach, the rug will quickly be pulled from under many late payers, leading to thousands more repossessions.”

The CML also revealed that there has been a slight rise in households that have fallen slightly into arrears on their payments, with the figure rising from 77,800 to 78,500.