Personal insolvencies in England and Wales at highest level since 2018

The number of people going financially insolvent across England and Wales jumped to the highest level in more than three years in the first quarter of this year.

There were 32,305 personal insolvencies between January and March, according to the Insolvency Service, marking the highest total since the final quarter of 2018 when 33,768 cases were recorded.

Personal insolvencies were up by 17% in the first quarter of this year compared with the previous three months.

Within the total, individual voluntary arrangement (IVA) and debt relief order (DRO) numbers increased, while bankruptcies were lower.

Total personal insolvencies were also 14% higher than in the first quarter of 2021.

IVAs made up nearly three-quarters (74%) of official insolvency cases in the first quarter of this year, while DROs made up 21% and bankruptcies accounted for the remaining 5%.

IVAs are agreements whereby money is shared out between creditors. DROs are aimed at people with relatively low amounts of debt they have no realistic prospect of paying off. Bankruptcies are often seen as a “last resort”.

Last June, the debt threshold at which people can apply for a DRO was increased from £20,000 to £30,000.

A breathing space scheme was launched in May 2021, giving legal protections from creditors for 60 days, with most interest and penalty charges frozen and enforcement action halted.

Problem debt can sometimes be linked to mental health issues, and protections are also available for people in mental health crisis treatment for the full duration of their crisis treatment plus 30 days.

Between May 4, when the scheme launched, and March 31 2022, there were 58,463 breathing space registrations.

The total was made up of 57,555 standard breathing space registrations and 908 mental health crisis breathing space registrations.

Christina Fitzgerald, president of insolvency and restructuring trade body R3 said: “The first quarter of this year was a worrying one for consumers.

“After two years of economic uncertainty caused by the pandemic, which led to many worrying about whether they’d have a job when the furlough scheme finished, people in England and Wales have had to contend with rising inflation – with fuel and food costs being particular pinch points.

“Employment levels have remained strong, but wages haven’t kept pace with inflation, and many people are worried about the economy and their personal finances. And with household debt increasing and credit card borrowing rising, that situation could well become more concerning in the coming weeks and months.

“Our message to anyone who is worried about their financial situation is: seek advice as soon as possible.”

Joe Cox, senior policy officer at charity the Jubilee Debt Campaign said: “The clear and alarming upward trend in personal insolvencies shows that a debt crisis is overwhelming UK’s households.”

Insolvency Service figures also showed there were 4,896 company insolvencies across England and Wales in the first quarter of this year.

The number of company insolvencies was 6% higher than in the previous three months and more than double (a 112% increase) the total seen in the first quarter of 2021.

The number of creditors’ voluntary liquidations (CVLs), which totalled 4,274 and made up 87% of cases, was at the highest quarterly level since the start of the series in 1960, the Service said.

The number of compulsory liquidations also increased but remained lower than levels seen before the coronavirus pandemic, it added.

Ms Fitzgerald added: “The main cause of the increase in corporate insolvencies this quarter is an increase in creditors’ voluntary liquidations (CVLs), which are now at a level not seen for more than 60 years.

“It seems more and more directors feel they can’t carry on trading and are choosing to close their business’s doors before they are forced to.”