Credit, Collections & Insolvency News
Accountant in Bankruptcy (AiB) has released official statistics reporting personal insolvencies in Scotland for the fourth quarter (January to March 2018) of 2017-18. Provisional estimates show that in 2017-18 personal insolvencies in Scotland increased by 4.7% to 10,503 from 10,032 in 2016-17. Estimates for 2017-18 are provisional until final figures are published in July 2018.
The number of personal insolvencies (bankruptcies and protected trust deeds) in Scotland fell by 7% in Q4 2017-18 (January-March 2018) compared with Q3 2017-18 (October-December 2017) and fell by just 0.6% compared with Q4 2016-17 (January-March 2017).
Personal insolvencies (bankruptcies and protected trust deeds (PTDs)) rose for the second consecutive year but remain below levels seen between 2005-06 and 2014-15. The increase in personal insolvencies in 2017-18 was due to PTDs, which increased by 9.0% on the previous year.
In 2017-18, there were 2,322 debt payment programmes (DPPs) approved under the Debt Arrangement Scheme (DAS), 89 more than a year earlier. In 2017-18, £37.6 million was repaid from debtors under DAS compared with £37.3 million in 2016-17. There were 2,501 personal insolvencies in Scotland in 2017-18 Q4, similar to the 2,516 personal insolvencies in the quarter in the previous year (2016-17 Q4). There were 1,038 bankruptcies awarded during this quarter, a 7.0% decrease on the same quarter in 2016-17. PTDs increased by 4.5% to 1,463 over the same period.
A total of £9.3 million was repaid through DAS during this quarter, compared with £9.2 million in 2016-17 Q4.
Commenting on the Accountant in Bankruptcy’s corporate and personal insolvency statistics for the period January to March 2018 (Q4 201718), Tim Cooper, Chair of R3 in Scotland, the insolvency and restructuring trade body said “The latest statistics, showing a fall quarter-on-quarter in personal insolvencies in Scotland, are a slight deviation from the measured and steady rise we’ve seen since the end of 2015. Despite this latest decrease, we think there are still reasons for concern about the state of Scottish people’s finances.
“Between December and February there were 17,000 fewer people in work in Scotland, and a slight rise of 3,000 in the number of people who were unemployed and looking for work. The unemployment rate of 4.2% is still low by historical standards, but in the era of insecure contracts and the gig economy, looking at unemployment alone to explain personal insolvency levels is not sufficient.”
“People paid by the hour who were not able to get to work during the extended period of poor weather in the first quarter may have seen an impact on their finances. The increases in the National Living Wage and National Minimum Wage at the beginning of April should have improved many people’s immediate financial position, although in a number of cases any pay rise will have been offset by an increase in the default auto-enrolment pension contribution, from 1% to 3% of salary, which will have cut take-home pay.”
“Although inflation has recently dipped, and is now by some measures lower than wage growth, providing relief for many, it’s important to remember that wage growth has been sluggish at best for some time now, and many people have responded by reducing their savings rate, or running down their savings in order to keep up with their outgoings. This has left large numbers of people without any form of financial cushion to cope with unexpected events.”
“The Bank of England increased interest rates in November, to 0.5%, and many forecasters believe that another rise, taking the base rate to 0.75%, could be announced in the near future. With interest rates having been so low for so long, many people who came of age and became financially independent during the post-crisis period since 2008 will not have experience of increasing interest rates, with the knock-on effects on consumer credit availability and affordability, and could be in for a rude awakening.”