Personal Insolvencies in England & Wales- Case of Location, Location, Location?
On 13 July, the Insolvency Service published its annual review of personal insolvency statistics for England & Wales for the 2016 calendar year. That annual review can be accessed here. This blog discusses some of the key findings contained within that report.
A key point to note is that the Insolvency Service’s definition of “individual insolvencies” used to compile these numbers includes bankruptcies, IVAs and Debt Relief Orders.
One of the main findings was that the total number of insolvencies increased for the first time since 2009, with the total insolvencies per 10,000 adults increasing from 17.6 in 2015 to 19.7 in 2016; an increase of 12%. Those numbers are, however, significantly lower than the 2009 peak of 30.9.
The statistics show that the majority of those insolvencies took the form of an IVA. Of the 19.7 insolvencies per 10,000 adults in England & Wales, 54.8% were IVAs, 28.45% were Debt Relief Orders and 16.75% were bankruptcies.
The figures in relation to IVAs have remained reasonably constant since 2009, despite the dramatic fall in total insolvencies (and specifically bankruptcies) during the same period. In fact, other than 2015, when the rate dropped to 8.8, the number of IVAs has consistently been between 10 and 12 per every 10,000 adults since 2009. During the same period, the numbers of bankruptcies fell from a peak of 17.2 in 2009, to the current rate of 3.3, representing an 80% decrease.
The reasonably stable rate of IVAs compared to a dramatic decrease in the number of bankruptcies would suggest that in recent years, a greater number of IVAs have been successful, with fewer IVA supervisors having to petition for the debtor’s bankruptcy following a failed IVA. Judging by the statistics alone, it is unclear what has been the effect, if any, of the increase in the debt threshold for creditor petitions from £750 to £5,000 in October 2015 and the changes to the procedure by which debtors can make themselves bankrupt (which can now be submitted online without the involvement of the Courts) from April 2016.
In terms of geography, of the 10 local authorities with the lowest number of insolvencies per 10,000 adults, 9 were in London and the South East. Of the 10 local authorities with the highest number of insolvencies, 7 were in coastal areas, ranging from Hull, Great Yarmouth, Blackpool and Torbay (i.e. from all corners of England & Wales, other than the South East). Two of those areas (Hull and Blackpool) also appear in the Office of National Statistics’ 2015 Indices of Deprivation listing the top 10 most deprived local authority districts in England.
Coastal areas have continually topped the insolvency charts, having higher levels of unemployment and economies that are more dependent on tourism. The reliance on the tourism industry means that the jobs available in these regions are often seasonal in nature and attract lower wages compared to other industry sectors. These lower wages make those areas more susceptible to pressures such as inflation and rises in interest rates (if/when such an increase occurs).
Whilst the full impact of the current uncertainty surrounding Brexit and the minority government remains to be seen, based on the statistics for 2016, it appears that the number of individuals getting into financial difficulty is on the rise, with large disparities between geographical areas of the UK.