Rise in personal insolvencies reflect ‘challenging times’

The Insolvency Service has released its latest statistical release shows the outcome status of Individual Voluntary Arrangements (IVAs). The
statistics show:

• The percentage of IVAs failing within the first two years has increased
• Ten IVA providers accounted for over 80% of new IVAs registered in 2017.
• Total insolvencies rose for the second consecutive year, returning to the levels seen in 2013 and 2014.
• This increase was driven by individual voluntary arrangements, which reached the highest recorded annual total. Latest quarter (Q4
• In the last quarter of 2017 Individual insolvencies remained stable compared with the previous quarter.
• There were 99,196 individual insolvencies in England and Wales in 2017 – a rise of 9.4 percent on 2016.
• One in 467 adults (0.21percent of the adult population) became insolvent in 2017, up from 507 in 2016.
• The rise was driven by significant increases in individual voluntary arrangements (IVAs) for the second year running.

Commenting on the Insolvency Statistics Jane Tully, director of external affairs at Money Advice Trust, the charity that runs National Debtline, said “We have now had two consecutive years of significant growth in insolvencies, and this trend is, of course, a cause for concern. Today’s figures reflect the challenging times’ many households across the country are facing. At the same time, the fact that this rise is being driven solely by an increase in individual voluntary arrangements (IVAs) is inescapable.

“We remain concerned that IVA products are being sold that are unsuitable for people’s circumstances – and believe that the lead generation companies that are a big part of this problem should be brought under the Financial Conduct Authority’s regulatory regime and robust practices put in place to ensure people are provided correct information.”

Alec Pillmoor, personal insolvency partner at RSM said ‘There are clearly growing levels of financial distress in some households, due in part to rising interest rates, falling wages or changes to employment status. Over the last two years, there’s been a 23 percent increase in the number of people entering an insolvency process. This is despite employment levels being at a record high.”

‘Instead, high levels of indebtedness – even for those with regular incomes –  is such that they have no option but to enter one of the insolvency routes. We’ve seen a notable increase in the use of IVAs which have risen by 20 percent in each of the last two years. This suggests many people are taking a proactive approach to resolving their financial issues. Opinions appear to be mixed over the outlook of the economy and the direction of interest rates over the next year.”

‘In the FT’s most recent annual survey of economists, a fifth predicted there would be no further interest rate rise this year, while two-fifths expected rates to rise by at least 0.5 percentage points. If the latter turns out to be true, then even more over-indebted households may find themselves in difficulty.’