The number of people starting an IVA fell in the third quarter of 2018. However the current year to date total remains 10% higher than the same period in 2017.
- IVA Statistics Table
- Record numbers of people starting an IVA
- Why are more people using IVAs?
- Are personal debt problems rising?
Overall the total number of people declaring themselves insolvent (including IVA, Bankruptcy and DRO) increased by 10% in the first three quarters of 2018. This is compared to the same period last year (up from approximately 74,500 to approximately 81,800).
IVA Statistics Table
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Source: The Insolvency Service Official Statistics (Not Seasonally Adjusted)
Record Numbers of people Starting an IVA
The number of people starting an IVA in 2018 remains on course for a record high. If the volumes continue at their current levels over 60,000 people will make use of the debt solution this year. It will be the highest number ever recorded in a single year.
In the same period the number of people going bankrupt or starting a Debt Relief Order also increased by around 10%. As such there now seems to be compelling evidence that the number of people struggling with debt is on the increase.
This situation is not unexpected. Although employment in the UK is currently at record highs the jobs that have been created are 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.
Why are more people using IVAs?
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 the Debt Management Plan solution.
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 the payments last for a fixed period of 5 years. However an IVA is not suitable for everyone. Arguably some people are being “sold” the IVA solution where they would be better off going Bankrupt.
Anecdotal evidence suggests many people who have started an IVA in the past 2 years would otherwise have started a DMP.
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.