Individual insolvencies for 2016 rose 13% on the previous year but were the second lowest annual figure for 10 years.
A total of 90,930 cases were reported with IVAs being the most common path of insolvency. The number of IVA cases in 2016 are the third highest annual figure of IVAs in the last 10 years
|Type||2016 Total (provisional)||% Change on 2015|
Even with the introduction of the online adjudicator service, Bankruptcy figures decreased by 5.4%. Orders on the application or petition of the debtor decreased by 2.6%, while those on the petition of the creditor fell 12.6%.
The increase in DROs is attributed to the change in eligibility criteria since October 2015.
The overall uplift on 2015 is the first time that annual insolvency figures have risen since 2010. In this instance, the rise was 6.4% on the previous year.
Compared to the same period in 2015 total insolvencies have risen by 9.8%. Bankruptcies stayed at a similar level while DROs fell by 4%. IVAs rose by 21.7%. From the previous quarter, total insolvencies were down by 4.3%.
Prior to Q4 in 2016 total individual insolvencies had risen for five consecutive quarters. This was driven by an increase IVAs.
Growth in borrowing
The quarterly figures came a day after figures from the British Bankers’ Association indicated that borrowing (consumer credit) rose at an annual rate of 6.6% against a backdrop of falling retail sales.
Similarly there has been a great deal of debate, both from Bank of England officials and in the media, about consumer indebtedness through unsecured lending. The rate of growth in unsecured lending may be cause for concern if interest rates were to rise during the course of the year. Although annual growth of 6.6% is slower than the rate of growth of around 7% in October, this is still very high and out of line with average real earnings growth and inflationary expectations. There are signs that retail growth is flatter on a 6-month moving average, and December’s retail sales actually showed a substantial drop in retail spending on a month-on-month basis.
Some of this may be because Christmas sales (and therefore expenditure) are pushed increasingly into October and November. However, the fact that retail sales growth was slower in November and negative in December suggests that consumers were holding back slightly and this is reflected in the unsecured lending data.
Rebecca Harding, Chief Economist, BBA
You can read the full article on the BBA website.
The full release for insolvency stats can be found on the Insolvency Service website.