Insolvency Data

The most significant change in Q3 was the fall in volume of Sequestrations.

The volume of DROs has now matched or exceeded those of bankruptcies in 5 out of the last 6 months, and Q3 is looking set to be the first complete quarter where DROs outnumber bankruptcies.

In Scotland, July’s volume of Sequestrations was the lowest in over 4 years.  This contrasts with the very high volume in May, and combined with the fact that the fee for a debtor-petitioned Sequestration rose from £100 to £200 on 1st June, this gives clear evidence of a rush by debtors to avoid this increase.

Q2 has shown a continued contrast between trends in England/Wales and Scotland, with modest growth in insolvency volumes north of the border not mirrored elsewhere.

More individuals entered DROs in May 2012 than entered Bankruptcy.  This has never happened before, and although trends suggested it would, it remains a significant landmark in the continuing shift away from Bankruptcy – which has gone from the most popular to least popular insolvency solution in under 2 years.

Overall Insolvency volumes were down 12% from March to April, with falls in most solutions.  This is expected at this time of year, with the Easter holiday period meaning a shorter working month.

For the first time ever, March saw the volume of Debt Relief Orders almost above that of Bankruptcies. This is in line with the prediction that DROs will outnumber Bankruptcies for the first time in 2012, and underlines the shift in the mix of insolvency solutions accessed by consumers.

For the second month in a row, Trust Deeds were significantly higher than this time last year. As volumes were high in the latter half of 2011 as well, it appears that this is a trend, rather than just a 'blip'.

Month to month changes from December to January give little early indication of long-term trends through 2012 as volumes are strongly influenced by the Christmas period.

Although bankruptcies rose from their low in December they were actually 25% below 2011 volume indicating that the trend observed throughout 2011 will continue. In contrast, IVAs showed a 20% fall from December but a 7% rise versus 2011 – this may be an early indicator that we will see growth in the IVA market in 2012.

Full year Insolvency volumes for 2011 were 119,000 in England & Wales, and 20,000 in Scotland. This represents a 13% decrease in England & Wales, and a 3% overall decrease in Scotland. It is important to remember that this decrease is in comparison to record high insolvency levels in 2010, and that volumes remain significantly above pre-2009 levels.

Seasonality had an impact on November volumes for some insolvency solutions, and similar effects will mean lots of volatility, and ultimately lower overall insolvency volumes over the next 3 months. DROs showed an 11% rise from October to November, while Trust Deeds showed a 20% decrease. Both these effects fit trends from previous years and are therefore seasonal, rather than indicators of any longer term trends into 2012.

In 2011 we have seen a change in the mix of insolvency solutions. While Bankruptcy volumes have fallen by nearly 30%, IVA volumes have fallen by only 8%, and DRO volumes have grown by nearly 20%.

Our data shows that total insolvencies in England and Wales in Q3 2011 were 29,700. This was 12% behind the same period for 2010.

August was the first month of the year in which IVA volumes were higher than in 2010. This is a good indicator that the 12-month rolling total of IVAs may well now start to rise (having previously fallen to less than 49,000 compared to 52,000 during the same period in 2010). This growth should not be unexpected given the current economic conditions.

In Scotland, Trust Deeds have been above 2010 volumes for each of the last 4 months. Although year-to-date volumes are still 3% below 2010, if the current trend continues it will translate to a full-year increase.

The first half of the year has seen a decrease in overall insolvency volumes across the UK compared to 2010, and this will almost certainly translate into a full-year decrease.

In May there was an increase in all insolvency volumes compared to April, which was a shortened month due to bank holidays. Trust deeds were particularly high compared to expectations, and we will be monitoring whether this is an isolated data point or an indication of a change in the Scottish trend of volume reduction.

In April there was a 17% relative reduction across all insolvency solutions compared to March. The exception was a 10% increase in trust deeds which, as a result of a longer reporting cycle, was driven by increased volumes in March.

March saw a large seasonal increase in monthly volumes of Insolvencies, estimated at a 31% increase compared to February.

February insolvency volumes increased 24% compared to January, led by a 47% increase in IVAs and 13% increase in Bankruptcies following the seasonal Christmas and New Year lull.

Overall, the three-month trend (Nov – Jan) in insolvency volumes was 15% lower than the preceding three months. However, this is an expected seasonal trend which is seen each year, as consumers and IPs navigate the Christmas period.