The Insolvency Service has reported that the number of individual insolvencies in the first quarter of 2020 was 11% lower than in the final quarter of 2019, as well as being 4% lower than in the same period in 2019.

The first three months of 2020 saw 27,849 individual insolvencies, comprising:

  • 16,714 individual voluntary arrangements (IVAs) (60% of the total)
  • 6,875 debt relief orders (DROs) (25%)
  • 4,261 bankruptcies (15%)

This is the lowest quarterly figure since the 24,763 that were recorded in the third quarter of 2018.

While the total number of individual insolvencies is falling, this was not the case when we look solely at bankruptcies, as here the numbers reported for 2020 Q1 were higher than in both Q1 and Q4 of 2019.

Comparing each of the three areas, the number of IVAs fell by 7% between 2019 Q4 and 2020 Q1, while the change in the number of DROs was minimal and bankruptcies showed a 2.5% rise.

Furthermore, bankruptcies initiated by the individual involved, where proceedings can commence without any court involvement, are at their highest level for more than six years.

Bankruptcies initiated by creditors and involving traditional court hearings are now at their lowest level for 10 years.

Michael Mulligan, insolvency and restructuring partner at law firm Shakespeare Martineau, described the Q1 figures as “the calm before the storm”. The final days of March 2020 were of course the time when coronavirus really started to have an impact on daily life in the UK, and he suggested that the figures were skewed by restrictions on court reporting from mid-March onwards as the lockdown took hold.

Other experts were divided as to the impact Covid-19 might have on the figures in the next quarter.

Duncan Swift, who recently left his post as president of insolvency and restructuring at insolvency trade association R3, warned that “many people are just one change in circumstances away from being unable to keep on top of their debts”, going on to list “illness, a relationship breakup, a reduction in hours at work or the threat of job loss” as things that can “all be devastating even in more ‘normal’ times, but the impact of coronavirus has made this underlying reality more visible.”

Alec Pillmoor, personal insolvency partner at insolvency and business advisory firm RSM, forecasts a further fall in the number of personal insolvencies in 2020 Q2, firstly because lenders have been forced by the Financial Conduct Authority to provide massive amounts of forbearance to borrowers in recent weeks, but he also observed that:

“Anyone currently furloughed, or concerned for their future employment, would presently have great difficulty in putting forward proposals for an IVA based on their future income.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article