IVA statistics and analysis

IVA statistics and analysis

So far in 2020 there has been a 10% reduction in the number of people starting an IVA compared to 2019. This is a direct consequence of the financial support offered to people during the coronavirus pandemic by government and financial institutions.

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IVA Statistics Table

 Qtr 1Qtr 2Qtr 3Qtr 4Total
202015,42525,28113918  54,624

Source: The Insolvency Service Official Statistics

Analysis of the IVA numbers

At just under 78,000, a record number of people started an IVA in 2019. This was the highest number ever recorded in a single year. 

The figure suggests that the number of people struggling with debt is on the increase. But, the numbers have fallen so far in 2020.

However, the fall is not due to a reduction in underlying debt problems. There is no doubt that many people are currently putting off having to use an IVA because of coronavirus support. Incomes are being maintained with furlough and self employment schemes. Expenses are being lowered with support from loan and mortgage companies. 

It is likely that we will see a reduction in IVAs overall in 2020. However these figures are expected to start rising again quickly once financial support offered due to Covid 19 is turned off.

Why are more people using IVAs?

Up until March 2020, employment in the UK was at record highs. However many the jobs are often lower paid or based on zero hours contracts. Huge numbers of people are earning no more than they did 10 years ago and in real terms their incomes have actually fallen.

Coupled with this, since April 2014 the debt management regulatory regime has changed significantly. In particular the FCA (Financial Conduct Authority) has increased regulation surrounding the provision of Debt Management Plans (DMP).

To avoid this a number of providers have changed their business model away from DMPs. Instead they are now concentrating on marketing IVAs which remain outside the FCA regulatory regime. As a result more people have started an IVA rather than a DMP.

This is not necessarily a bad thing. One of the advantages of an IVA over a DMP is that they last for 5 years after which outstanding debt is written off. A DMP can last far longer. However an IVA is not suitable for everyone. Some may be better off going bankrupt.

Are Personal Debt Problems Rising?

The figures are now all starting to point to the fact that personal debt problems in the UK are on the increase. Over the last few years individuals have funded their life styles by borrowing rather than earning more as wages have stagnated or fallen.

In addition in the more recent past there have been a large number of high profile business failures (Carillion; House of Fraser; Toys ‘R’ Us UK; Maplin). These have impacted a significant numbers of jobs both directly and indirectly.

These pressures are resulting in higher numbers of people in financial difficulty. It seems likely that this situation will only get worse in the short to medium term as the uncertainty posed by Brexit and global world trade tensions leave employers with little room to increase wages.