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The seven-year glitch

Up until the end of 2016, the annual trajectory of personal insolvencies in England and Wales had followed a fairly benign pattern. 

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An annual decline in the total figures had continued steadily since 2010, in parallel with improving economic factors, bar a couple of quarter blips, such as rising employment and GDP.


But now the Insolvency Service’s official statistics point to a new pattern for this year, and they probably ask as many questions about the state of individuals’ finances as they answer.


The top line was that 90,930 people became insolvent during the full year of 2016 - the first annual increase since 2010. This was also a 13 percent rise on 2015.


This total comprised 49,745 IVAs, which were up 23 percent year-on-year and returned to levels generally seen from 2009 to 2014.


IVAs were the main driver of the annual rise though an overall bounce in IVA levels since a low point in the middle of 2015, now appears to have slowed down.


In comparison with a beleaguered commercial debt management sector, IVA providers have seen a period of flourishing activity, which may be linked to the likelihood of individuals being ‘flipped’ (sorry, recommended), into the personal insolvency route during the FCA authorisation process.


But putting aside IVAs for a look at the bigger picture, a rise in personal insolvencies month to month and quarter to quarter, had been picked up and signposted throughout last year.


In one of its Insolvency Market Trends reports put out in autumn last year, TDX Group pointed to the drivers of rising personal insolvencies during 2016. One was a natural growth in demand for debt solutions as a result of increased unsecured lending in the near/sub-prime space during the past few years. A second was that mono-line personal insolvency providers, which are not focussed on FCA authorisation, have been able to invest in marketing and acquiring new customers.


These two factors are among several drivers, but the bigger picture is clouded. The true extent of personal insolvency is masked by the lack of reliable statistics on informal debt arrangements.


See Credit Strategy’s March issue for the full article on p8.

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