Rachel Reeves disaster as insolvency expert issues dire 5-word debt warning

Record numbers of Britons are going bust, worrying new figures have indicated, heaping further pressure on beleaguered Chancellor Rachel Reeves. New figures released by The Insolvency Service on 19 August 2025, covering July 2025, confirm that debt relief orders (DROs)-a lifeline for those unable to pay off small levels of debt-are now at record levels, with experts warning the crisis is no longer just a warning sign but a "full-blown funeral procession" for Britain's economic health.

In July 2025, 10,515 individuals entered insolvency in England and Wales, including 599 bankruptcies, 4,001 DROs and 5,915 individual voluntary arrangements (IVAs). Over the last 12 months, one in every 413 adults in England and Wales has entered insolvency, up from one in 442 in the previous 12 months. Analysts have noted that bankruptcy rates have dipped only because many struggling households cannot even afford the court fees associated with going bust.

Oli Garnett, co-founder of Bristol-based consultancy Something Familiar, said: "If record debt relief orders are 'normal', then so is living off Pot Noodles and payday loans. This isn't a canary in a coal mine for Rachel Reeves, it's a full-blown funeral procession.

He continued: One in 413 adults hitting insolvency isn't a quirky stat, it's proof the economy is running on fumes. Bankruptcy is down only because people can't even afford to go bust properly.

"Call it what you want: resilience, stability, but the reality is Britain's skint, and papering over it with record DROs is like slapping a smiley face on a sinking ship."

David Stirling, an independent financial adviser at Mint Wealth in Belfast, added: "Our chancellor seems utterly blindfolded claiming economic growth, when all this evidence shows that the general public are facing a norm of debt relief orders. Given these statistics, DROs are fast becoming less of a safety net and more of a national pastime."

Stephen Perkins, managing director at Yellow Brick Mortgages, described the figures as "signwriting from a plane that the economy is broken and many individuals, after trying everything, including borrowing to get through, have finally run out of road and need to go into an Individual Voluntary Arrangement or Debt Relief Order and surrender".

He stressed: "The figures certainly do not give confidence on future growth, so the trend would indicate there is still worse to come."

Michelle Lawson, director at Fareham-based Lawson Financial, said: "If you keep spinning the truth you end up believing it yourself. Rachel Reeves' demolition of the economy and household finances tells a different story when you see statistics like this.

"Arguably people are taking out more debt than they can manage but you have to look at why and deal with the root cause. Sad desperate figures which show no signs of recovery."

Debt relief orders were designed for those with minimal assets and debts under £30,000, but experts warn their explosion in popularity is a symptom of systemic distress rather than a healthy adjustment.

With DROs cheaper and simpler than full bankruptcy, their rising use suggests people are seeking the quickest way to escape debts that have spiralled beyond control.

Economists argue that Britain's "zombie growth" model-propped up by borrowing, credit, and short-term fixes-is now showing up in insolvency data. As households buckle, so too does consumer confidence, dragging down the very spending Chancellor Reeves is banking on to reboot growth.

With one in every 413 adults now officially insolvent, Reeves faces the toughest of political and economic balancing acts: sticking to her promise of fiscal discipline without fuelling further household collapse.