According to figures released today, the number of people in England and Wales going insolvent, hit a seven-year high in 2018, explained by unmanageable debt. Company Insolvencies also saw an increase.
The Insolvency Service who commissioned this research, found that personal insolvencies were up by 16.2% from 2017, totalling 115,299. When looking at the data, as evidenced below, we can see a similar level of insolvencies to that in 2011. From seeing this, one can predict the number of insolvencies to continue rising, with further increased statistics expected for 2019.
Individual Voluntary Arrangement use drove this, as it hit its record level, increasing almost 20% on 2017 figures. There was a total of 71,034 IVAs used. An Individual Voluntary Arrangement is a deal between an individual and their creditors to repay back a debt over time, with the creditors interest maximised. An individuals’ main assets maybe protected as it is a way to avoid complete bankruptcy.
Debt Relief Orders also experienced an increase compared to 2017 (up 11.2%), as did bankruptcies (up 9.8%). A debt relief order freezes your debts for a year before writing them off, if they do not exceed £20,000. Bankruptcy is the most serious insolvency mechanism in that any assets you may have are likely to be sold to pay creditors including your home. However there are complex rules regarding your main residence so it is not a given that a bankrupt will lose their house.
Resulting from this, is the statistic that one in 401 adults in England and Wales became insolvent in 2018, compared to one in 466 for 2017.
Corporate insolvencies hit their highest level since 2014
There were 17,439 companies becoming insolvent for 2018 overall – a 0.7% rise from the year previous. Total liquidations fell by 0.5%, which included a rise in Compulsory Liquidations to 3,117, but a decrease in CVL’s, to 12,501. Despite this, Creditors Voluntary Liquidations (CVLs) still remained the most common form of insolvencies for companies.
Company Voluntary Arrangements (CVA) (16%) and Administrations (11.2%) were seen to rise but in the case of CVAs from a very low base with only 356 CVAs in the last quarter.
On an industry analysis, we can see that construction, retail trade and accommodation and food service saw the greatest number of insolvencies for 2018. This is not unsurprising, following the construction industry still being affected from Carillion’s January 2017 Collapse, and the retail crisis which occurred for a significant period of 2018 – causing the likes of Toys R Us, Maplin, New look and Carpetright to be affected, but to name a few.