Personal insolvencies in England and Wales down to a five-year low

Personal insolvencies in England and Wales were down to a five-year low in the first quarter of 2013, according to latest official figures, even as the ongoing squeeze in household budgets continued.

The first three months saw a total of 25,006 people declared insolvent, a fall of 12.9 per cent on the same period of 2012 and slightly less than the 25,454 recorded in the previous quarter, data from the Insolvency Service showed.

Over the 12 months ending in the first quarter of 2013, the number of people becoming insolvent stood at one in 419, down from one in 405 in the previous quarter. According to the Insolvency Service, though the current rate was "still elevated" as against the annual average of about one in 1,600 adults recorded over the past 25 years.

The quarterly total comprised bankruptcies, individual voluntary arrangements (IVAs), where debtors settled arrangements with their creditors to repay part of their borrowing over an agreed period, as also debt relief orders (DROs), a form of insolvency aimed at non-homeowners with debts of up to £15,000.

The number of bankruptcies declined 27 per cent in the first quarter of 2012 to 6,663, while IVAs were down 4.9 per cent at 11,124.

DROS, that were seen rising consistently following their introduction in April 2009, have now declined for two successive quarters, with 7,219 registered in the first three months of the year. The figure fell 8.6 per cent on the same period of 2012.

Company liquidations too continued to decline to levels last seen five years ago. The first three months saw these decline 15.8 per cent as against the same period in 2012.

According to official figures for Scotland, conditions were improving at a faster pace than in the rest of the UK.

Personal insolvencies in Scotland were down 28 per cent, according to an announcement two weeks ago, while company insolvencies were down 22 per cent.

It was not immediately clear why the number of insolvencies had fallen so quickly when the economy was still struggling to grow.

According to Matthew Chadwick of the accountancy firm BDO, the latest figures continued to defy logic.

He said the lowest level of personal insolvencies since 2008 was difficult to explain against a broader backdrop of limited job creation, heightened unemployment, raised inflation and low wage growth.

However, according to Charles Turner, president of the Insolvency Practitioners Association (IPA), the official figures underestimated the real situation.

He said the figures released in the morning did not in his opinion reflect the reality of life for a great number of consumers who were undoubtedly struggling, as wage growth flat-lined and their household costs continued rise.