Personal insolvencies jump to six-year high across England and Wales

02-08-2018

The number of people whose finances have deteriorated so severely that they have become insolvent has jumped to a six-year high, official figures show.

Across England and Wales, 28,951 personal insolvencies were recorded between April and June – marking the highest quarterly total since the first quarter of 2012.

Personal insolvencies jump to six-year high across England and Wales

The upswing was driven by a record number of people taking out individual voluntary arrangements (IVAs), where money is shared out between creditors.

The figures, released by the Insolvency Service, show total personal insolvencies leapt by more than a quarter (27.3%) compared with the second quarter of 2017.

Three types of personal insolvencies make up the figures – bankruptcies, IVAs and debt relief orders (DROs) – a type of insolvency aimed at people with relatively low levels of debt but no realistic prospect of paying it off.

The Insolvency Service said nearly two-thirds (62%) of personal insolvencies in the second quarter of 2018 were IVAs, around a quarter (24%) were DROs and 14% were bankruptcies.

There were 17,987 IVAs, marking a 5.7% increase on the first three months of this year – and “the largest quarterly number of IVAs since they were introduced in 1987” – the report said.

The figures also showed company insolvencies in England and Wales in the second quarter.

A total of 3,918 companies entered insolvency in the second quarter of 2018, consisting of 2,731 creditors’ voluntary liquidations, 752 compulsory liquidations and 435 other insolvencies.

The Insolvency Service said company insolvency numbers were down compared with the previous quarter but up compared with the second quarter of 2017.

Excluding bulk insolvencies, the construction industry had the highest number of insolvencies in the 12 months ending in the second quarter, the report said.

Stuart Frith, president of insolvency and restructuring trade body R3, said: “There are plenty of reasons why people might be feeling the pinch. Wage growth is barely higher than inflation, after a long period of real wage falls.

“Although unemployment is low, there are more people earning variable amounts in the gig economy, which can make budgeting difficult.

“Meanwhile, outstanding consumer credit volumes have been growing, as has the average amount of debt per head.”

He continued: “It’s important to remember that these statistics don’t tell the full story of personal insolvency as they don’t include the number of people in non-statutory debt management plans.”

Looking at company insolvencies, he said: “All businesses are facing a range of pressures… Business rates rises continue to be cited as a reason for business struggles, too.”

Source: Yahoo Finance