PwC analysis: Britain is Broke - Personal bankruptcies on the way up

Published at 10:06 AM on 06 February 2009

Figures released today by the Government’s Insolvency Service revealed that levels of personal insolvency in England and Wales continued to increase for the second consecutive quarter as the recession really begins to bite.

The figures show that 67,428 individuals were made bankrupt in the year, and 39,116 entered into Individual Voluntary Arrangements (‘IVA’), totalling 106,544 personal insolvencies. Whilst this is lower than either 2006, the highest year on record, or 2007, the underlying trend is upwards. IVA numbers are thought to be down overall, but bankruptcies were the highest ever.

Total personal insolvencies in Scotland for 2008 were 19,864 and there were 1,638 persoanl insolvencies in Northern Ireland.

Pat Boyden, personal insolvency expert at PricewaterhouseCoopers LLP, said:

“Most casual observers would have expected numbers of both types to be going through the roof. Indeed, at the end of 2007, when there was much talk about the declining economic conditions, some experts were predicting 130,000 or more insolvencies in 2008. PwC was more cautious.

“IVAs were largely based on consumer debt and that had been stagnant for a number of months, suggesting perhaps that finances were stabilising in many households. There had been, however, a shift to secured lending based on the availability of second mortgages and increasing house prices. Without the basic components of an IVA, namely unsecured debt, there would be less demand: secured borrowing would bring its own problems in the shape of repossessions.

“The gradual acceptance of the IVA Protocol, and the worsening financial position resulted in a small increase in IVA figures in the last 6 months, but with individuals having less to offer, other forms of insolvency became a better option.

“Bankruptcy numbers are on the increase and the year’s total is a record. To say that individuals have simply shifted from IVAs to bankruptcies in order to deal with their problems is a little simplistic, but anecdotal evidence suggests that there is some support for the argument. In the current climate, there will be an increase in traders, company directors with personal guarantees, professionals, and entrepreneurs in general seeking bankruptcy as relief from their debts."

Our analysis reveals that these trends are likely to continue in 2009. The concern for creditors is that weakening IVA dividends and numbers will put more pressure on balance sheets, but even so, an IVA will return more than a bankruptcy. Perhaps it is time for creditors to review their attitudes towards the IVA.


Notes to Editors:

The Official Insolvency Statistics for Q4 2008 for England and Wales were released on Friday 6 February 2009. They are the most comprehensive record of the number of insolvencies and bankruptcies available and are derived from administrative records of the BERR Insolvency Service and Companies House Executive Agencies. 

For more information contact:

Katherine Howbrook
Financial Services, PR Manager, PwC 
Tel:020 7212 2711 
Mobile:07515 119 096 

Stephanie Howel
Advisory PR Manager, PwC 
Tel:020 7213 2421 
Mobile:07734 456 098 


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