Britain sees 14% annual rise in missed direct debit payments
2023.09.14 08:12
© Reuters. FILE PHOTO: People shop at Borough Market in London, Britain July 19, 2023. REUTERS/Anna Gordon/File Photo
By David Milliken
LONDON (Reuters) – Britain reported an annual rise of 14% in missed bill payments last month for their second highest rate on record, figures on Thursday showed, pointing to growing financial strain on households.
The percentage of failed direct debits – mostly used for utility bills or mortgage and credit card repayments – rose from 0.82% in July to 0.83% in August, the second highest rate in monthly records, which started in January 2019.
A year earlier, in August 2022, 0.73% of direct debits failed. The peak in the series was in January, at 0.94%, reflecting a post-Christmas spike as households ran out of money in their current accounts.
The figures are published by Britain’s Office for National Statistics based on data from interbank payment systems operators Pay.UK and Vocalink.
British households’ finances have been under pressure over the past year from high inflation and rising interest rates.
Consumer price inflation hit a 41-year high of 11.1% in October 2022 and was still far above target at 6.8% in July, the highest among major advanced economies. Food and energy bills have risen faster than other prices, hurting poorer households.
The Bank of England has raised rates 14 times since December 2021 and economists expect it to raise rates for a 15th time next week to 5.5% – bringing higher bills for mortgage-holders.
Thursday’s data showed 0.46% of direct debits for mortgages were missed in August, unchanged from the month before but up 21% from a year earlier.
Fitness club memberships – whose onerous cancellation terms sometimes see consumers refuse to pay – had the highest direct debit failure rate, at 4.44%.
Separate figures on personal bankruptcies and debt relief orders released last month showed a sharp rise in July, with the total up 38% on a year earlier.
However, unlike the missed direct debit payments, the numbers for these more serious indicators of financial difficulty remain below pre-pandemic levels.
