The number of people becoming financially insolvent in England and Wales jumped to a nine-year high in 2019 as the burden of increasing debt levels took its toll on low- and middle-income households.
There were 122,181 personal insolvencies last year, an increase of 6% on 2018, and the highest annual total since 2010, according to figures from the government’s Insolvency Service.
The rise was largely driven by a 9.8% increase in individual voluntary arrangements (IVAs) to 77,982, the highest annual level of IVAs recorded since their introduction in 1987.
Insolvency experts blamed the rise of insecure employment, delayed payments under the universal credit welfare programme, and Brexit uncertainty for the steep climb in the number of people running up high levels of debt.
The Resolution Foundation said in a report earlier this month that low-income households had come to rely on expensive consumer debt at an increasing rate over the past decade and were now vulnerable to unexpected hard times.
The Ministry of Justice recently revealed that a record number of county court judgments (CCJs) were issued last year against individuals who fell into debt, double the level of eight years ago.
The data showed that the number of CCJs against individuals in England and Wales who failed to repay their debts climbed by 3% – or 30,138 – to 1.15m in 2019.
Michael Mulligan, an insolvency partner at law firm Shakespeare Martineau, said the figures “paint a bleak picture” of the economy. He said the situation was unlikely to improve this year with “thousands of zombie companies hanging on across a number of vulnerable sectors”.
The Insolvency Service said the fourth quarter showed an improvement after dropping slightly from 30,565 in the third quarter to 29,261.
Analysis by the government last year showed women were more likely to be indebted and sign up to an IVA, which involves making repayments over a typical period of five years though usually after some debt relief. People living in coastal towns were also more likely to become financially insolvent.
Company insolvencies, excluding one-off “bulk insolvency events”, rose 6.8% year on year in 2019.
Excluding bulk events, which usually involved the collapse and restructuring of large retail and hotel chains, there were 17,196 corporate insolvencies in 2019 – the highest since 2013.
Duncan Swift, president of the industry trade body R3, said Brexit uncertainty was a factor, but weaker consumer confidence, a decline in hiring by employers, and recessions in both the manufacturing and construction sectors last year also played a part.
