UK insolvency numbers soar

Duncan Swift

Latest data from the Insolvency Service published today has shown that 99,196 people were declared insolvent in the UK in 2017 as the nation’s personal debt burden ballooned to £1.6 trillion.

The figure marks a 9.4 per cent rise on the year before and is very close to the peak figure recorded during the recession in the wake of the last financial crisis in 2008.

The rise in the UK as a whole represents a greater increase than that published last week by Scotland’s Accountant in Bankruptcy whose data showed there were an estimated 10,518 personal insolvencies in Scotland last year, representing an increase of 8 per cent compared with the full year 2016, when there were 9,748 altogether.

The Insolvency Service noted there was a slight improvement in UK insolvency numbers in the final quarter of 2017 when individual insolvencies decreased 0.2 per cent compared with the previous quarter.

There was also a small decrease in IVAs, which fell by 0.9 per cent compared with Q3 2017. IVAs however remained high and the three highest quarterly levels of IVAs since their introduction in 1987 were all recorded in 2017,” said the Insolvency Service.

The data also reveals that record numbers of households are now utilising “bankruptcy-lite” debt deals called individual voluntary arrangements (IVAs).

These rescue packages – where individuals reschedule their debts and agree to much lower payments – hit a record high of 59,220 in 2017, up nearly 20 per cent on the year before.

Experts have pointed to an expansion in credit card spending and car finance deals.

“One in 467 adults (0.21 per cent of the adult population) became insolvent in 2017, up from 507 in 2016,” said the Insolvency Service.

Duncan Swift of R3, the trade body for insolvency practitioners, said: “With personal insolvencies it’s always worth noting that the official statistics don’t tell the full story: there is a lot of ‘hidden’ insolvency out there.

“There are potentially tens of thousands of people in non-statutory debt management plans. Although these plans are regulated by the FCA, there is no record of exactly how many there are. This makes it impossible to grasp the full scale of serious indebtedness.”

Figures were also released on corporate failures which were also shown to have risen in 2017.

An estimated total of 17,243 companies entered insolvency in 2017, a rise of 4.2 per cent on the year before, said the Insolvency Service.

This compares with Scottish figures for last year released by the AiB this month which show 15 per cent fewer liquidations north of the border compared with 2016 (782 in 2017 against 920 in 2016).

Mr Swift added: “The slight rise in corporate insolvencies across 2017 as a whole is a reflection of the difficult year that firms in England and Wales have been through. Once exceptional events have been stripped out, there has been a small upwards trend in insolvencies since 2016, reversing several years of falling insolvency numbers.

“Inflation has eaten into many firms’ margins thanks to rising input costs on the one hand, and with customers proving somewhat reluctant to stomach higher prices on the other. Businesses have faced additional headwinds in 2017 with business rates changes, an increase in the National Living Wage, and the final stages of the pensions auto-enrolment roll-out. Slower GDP growth has hindered firms’ momentum, too.”