Accredited official statistics

Commentary - Individual Insolvency Statistics January to March 2021

Published 30 April 2021

Released

30 April 2021

Next release

30 July 2021

Media enquiries

Steven Fifer

+44 (0)30 3003 1568

Statistical enquiries

David Webster (author)

[email protected]

Kate Palmer (responsible statistician)

1. Main messages for England and Wales

• One in 425 adults (a rate of 23.5 per 10,000 adults) entered insolvency between 1st April 2020 and 31st March 2021. This is a decrease from the 25.3 per 10,000 adults who became insolvent during the 12 months to 31st March 2020.

• During Q1 2021, there were 29,140 (seasonally adjusted) individual insolvencies, as shown in Figure 1, comprised of 22,354 individual voluntary arrangements (IVAs), 4,143 Debt Relief Orders (DROs) and 2,643 bankruptcies.

• After seasonal adjustment, the number of insolvencies was 5% lower than in Q4 2020, with numbers of IVAs, DROs and bankruptcies all lower.

Figure 1: Individual insolvencies decreased in Q1 2021, with bankruptcies, DROs and IVAs all lower than in Q4 2020

England and Wales, Q1 2011 to Q1 2021, seasonally adjusted

Source: Insolvency Service

The long-term series prior to Q1 2011 can be found in the csv file that accompanies this release.

The number of bankruptcies and DROs have remained low since the start of the first UK lockdown in March 2020, when compared with pre-pandemic levels. This is likely to be partly driven by government measures put in place in response to the coronavirus (COVID-19) pandemic, including enhanced government financial support for companies and individuals.

As the Insolvency Service does not record whether an insolvency is directly related to the coronavirus pandemic, it is not possible to state its direct effect on insolvency volumes.

2. Things you need to know about this release

This statistics release contains the latest data on individual insolvency in the UK, presenting the numbers of individuals who have entered a formal insolvency procedure after being unable to pay their debts. Information is presented separately for England and Wales, Scotland and Northern Ireland.

The Insolvency Service separately publishes monthly experimental statistics to provide more up to date information on the numbers of company and individual insolvencies during this time of economic uncertainty. However, they have not replaced the quarterly National Statistics, since the information presented on a monthly basis is less granular and is less reliable for monitoring changes in trends over time. Note that the monthly statistics on individual insolvency may not be fully consistent with data presented within this statistical release.

Underlying data for these quarterly statistics for England and Wales were adjusted where there was evidence of seasonality, to account for variation in individual insolvencies across the year and allow for comparison to the most recent period within years. Data for Scotland and Northern Ireland were not adjusted. The seasonal adjustment models are typically reviewed on an annual basis. However, the trend in individual insolvencies during the 2020/21 financial year has reflected a very different pattern to that seen in previous years; largely a result of the coronavirus (COVID-19 pandemic). Therefore the 2021 review was not conducted, and 2021 data will continue to be seasonally adjusted using the 2020 model. See methodology section for further details.

Quarters referred to in this publication are calendar year quarters, such that Q1 2021 is the period from 1st January to 31st March 2021.

2.1 Designation as National Statistics

The United Kingdom Statistics Authority has designated these statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Statistics. Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

The last compliance review was conducted in July 2019: https://osr.statisticsauthority.gov.uk/correspondence/compliance-check-of-insolvency-statistics/

Designation can be broadly interpreted to mean that the statistics meet identified user needs; are well explained and readily accessible; are produced according to sound methods and are managed impartially and objectively in the public interest.

3. Individual insolvency in England and Wales

3.1 Numbers of individual insolvencies

After seasonal adjustment, there were 29,140 total individual insolvencies in Q1 2021, 5% lower than the number of individual insolvencies in the previous quarter and 1% higher than during the same quarter in the previous year.

IVAs were the most common individual insolvency procedure (77% of cases), followed by DROs (14%) and bankruptcies (9%). A summary of individual insolvencies can be found in Table 1. The long-term series prior to Q1 2020 can be found in the excel and csv files that accompany this release.

Unlike the monthly statistics, quarterly statistics are seasonally adjusted to account for seasonal variation in insolvencies across the year and allow for comparison to the most recent period within years.

Table 1: The number of bankruptcies, DROs and IVAs were all lower in Q1 2021 than Q4 2020

England and Wales, Q1 2020 to Q1 2021, seasonally adjusted

	Total individual insolvencies	Bankruptcies	Debt relief orders	Individual voluntary arrangements
2020Q1	28,936	4,347	6,862	17,727
2020Q2	31,886	2,521	4,776	24,589
2020Q3	19,824	2,776	4,451	12,597
2020Q4	30,769	3,007	4,217	23,545
2021Q1	29,140	2,643	4,143	22,354
Percentage change, latest quarter (2021 Q1) compared with:
2020Q4	-5%	-12%	-2%	-5%
2020Q1	1%	-39%	-40%	26%

Source: Insolvency Service

IVAs

The number of IVAs registered in Q1 2021 decreased by 5% from the previous quarter and increased by 1% from Q1 2020. However, the numbers of IVAs registered in Q1 2020 were artificially low as a result of one IVA provider experiencing technical issues which resulted in a large volume of IVAs being registered in Q2 2020 that would have otherwise been registered in Q1 2020.

Caution needs to be applied generally when interpreting the IVA numbers. IVAs are counted within these statistics once they are registered with the Insolvency Service by licensed insolvency practitioners. There can be a time lag between the date on which the IVA is accepted and the date of registration. Changes in volumes of registered IVAs may be in part due to changes in how insolvency practitioner firms operate.

Bankruptcies

The number of bankruptcies in Q1 2021 decreased by 12% from the previous quarter and was 39% lower than in the same quarter last year. The number of bankruptcies was the second-lowest since Q1 1990, with only Q2 2020, during the first UK lockdown in response to the COVID-19 pandemic, being lower.

Bankruptcies consisted of:

• 2,330 debtors’ applications, which was 14% lower than Q4 2020 and 37% lower than Q1 2020,
• 278 creditors’ petitions, a decrease of 9% compared to Q4 2020 and 52% lower than in Q1 2020.

90% of bankruptcies resulted from debtor applications. This is typical of the proportion during the COVID-19 pandemic, but is higher than pre-pandemic values of 75-85%. The numbers of debtors’ applications and creditors’ petitions were both amongst the lowest seen since 1998 when data on petition type started to be captured.

Figure 2: Bankruptcies made on both debtors’ and creditors’ applications remain historically low

England and Wales, Q1 2011 to Q1 2021, seasonally adjusted

Source: Insolvency Service

The long-term series prior to Q1 2011 can be found in the excel and csv files that accompany this release.

DROs

The number of DROs decreased by 2% in Q1 2021 compared with the previous quarter, and was 40% lower than during the same quarter last year. When DROs were first introduced in Q2 2009 their volumes increased for a few quarters before stabilising between 6,000 and 7,000 per quarter for most of the past decade. However, during the COVID-19 pandemic, the numbers of DROs have been lower, with Q1 2021 seeing the fewest DROs in any quarter since the quarter they were introduced.

The fall in DROs and debtor bankruptcies during the past year corresponds with a reduction in applications for these services, which coincided with the announcement of enhanced government financial support for individuals and businesses since the emergence of the coronavirus pandemic.

3.2 Rates of individual insolvency per 10,000 adults

In the four quarters ending Q1 2021, the individual insolvency rate was 23.5 per 10,000 adults in England and Wales (Table 2 and Figure 3). This corresponds to 1 in 425 adults having become insolvent in the 12 months ending Q1 2021.

The insolvency rate gives an indication of the probability of an individual becoming insolvent in the previous 4 quarters. As the rates are calculated as a proportion of the total number of adults, they are more comparable over longer time periods than the absolute numbers.

The rates presented for each quarter reflect a 4-quarter rolling rate per 10,000 adults. Therefore, the Q1 2021 rates, for example, were calculated using data covering the period Q2 2020 to Q1 2021.

Table 2: The rate of total individual insolvencies in the 12-month period ending Q1 2021 was lower than during the 12-month period ending Q1 2020

England and Wales, 4-quarter rolling rate per 10,000 adults

	Total individual insolvencies	Bankruptcies	Debt relief orders	Individual voluntary arrangements
2020Q1	25.3	3.6	5.8	15.9
2020Q2	25.7	3.2	5.4	17.1
2020Q3	23.1	2.9	4.9	15.3
2020Q4	23.7	2.7	4.3	16.7
2021Q1	23.5	2.3	3.7	17.4
Change in rate per 10,000 adults, 12 months ending latest quarter (2021 Q1) compared with:
2020Q4	-0.2	-0.4	-0.6	0.8
2020Q1	-1.8	-1.3	-2.1	1.5

Source: Insolvency Service

Change in rate numbers may not equal the difference in rates presented due to rounding.

The long-term series prior to Q1 2011 can be found in the excel and csv files that accompany this release.

In the four quarters ending Q1 2021:

• The IVA insolvency rate increased by 0.8 in comparison to Q4 2020, and by 1.5 in comparison to Q1 2020;
• the rate of bankruptcy fell by 0.4 from Q4 2020, and by 1.3 from Q1 2020; and
• the rate of DROs fell by 0.6 from Q4 2020, and by 2.1 from Q1 2020.

The overall rate of individual insolvency for the four quarters ending Q1 2021 was slightly lower than for the four quarters ending Q1 2020 (25.3 per 10,000 adults, or 1 in 395), as the decline in bankruptcies and DROs compared to Q1 2020 was larger than the increase in IVAs.

Figure 3: The individual insolvency rate declined slightly in the 12 months to Q1 2021 in comparison to Q4 2020

England and Wales, 4-quarter rolling rate per 10,000 adults, not seasonally adjusted

Source: Insolvency Service

3.3 Bankruptcies by self-employment status

Bankruptcies by self-employment status are presented with a lag of one quarter on most other statistics in this release. This is because it can take several weeks for trading status to be recorded following the date of the bankruptcy order.

In Q4 2020, there were 493 bankruptcies (seasonally adjusted) where the individual was self-employed, an increase of 4% on Q3 2020 but 37% lower than the same period last year.

There were 2,537 bankruptcies among other individuals in Q4 2020, an increase of 8% compared with the previous quarter but 24% lower than the same quarter of the previous year.

Whilst bankruptcies amongst the self-employed and other individuals increased from the previous quarter, they both remained historically low. The three quarters covering the COVID pandemic to date (Q2-Q4 2020) saw the lowest levels of bankruptcies in both groups since self-employment status was recorded in 2003.

Figure 4: Bankruptcies for the self-employed and other individuals both increased in Q4 2020 compared to Q3 2020, but remained lower than before the COVID-19 pandemic

England and Wales, Q1 2011 to Q4 2020, seasonally adjusted

Source: Insolvency Service

The long-term series prior to Q1 2011 can be found in the csv files that accompany this release.

3.4 Self-employed/Trader bankruptcies by Industry (SIC 2007)

This section breaks down the self-employed bankruptcies (also referred to as ‘trader bankruptcies’) in the previous section by Standard Industrial Classification (SIC 2007) categories. Figures in this section are summed over four quarters to reduce the volatility associated with quarter-to-quarter changes. As noted in the previous section, data for Q1 2021 are not yet available.

The industries (in accordance with SIC 2007) that experienced the highest number of trader bankruptcies in the 12 months ending Q4 2020 were:

• Construction (571, which was 26% of trader bankruptcies);

• Other service activities (540, 25%);

• Wholesale and retail trade; repair of vehicles (226, 10%);

• Transportation and storage (215, 10%); and

• Accommodation and food service activities (170, 8%).

These five categories made up 79% of trader bankruptcies in 2020. They were also the most common categories in 2019, when they made up 77% of trader bankruptcies. The numbers of bankruptcies in each of the five most common categories were lower than in the four quarters ending Q4 2019, reflecting the overall decline in trader bankruptcies in 2020.

The numbers in these categories may be driven by the number of self-employed people trading in a given category rather than the relative likelihood of traders in each category becoming bankrupt.

Figure 5: Most industries saw fewer trader bankruptcies in the four quarters ending Q4 2020 than in the period ending Q4 2019

England and Wales, Q1 2019 to Q4 2020, non-seasonally adjusted

Source: Insolvency Service

4. Individual insolvency in Scotland

Legislation relating to individual insolvency in Scotland is devolved. The Accountant in Bankruptcy, Scotland’s Insolvency Service, administers individual insolvency in Scotland. The figures below are not seasonally adjusted.

In Q1 2021, there were 1,675 total insolvencies in Scotland, 47% lower than during the same quarter of 2020. This comprised of 561 sequestrations (of which 389 went into sequestration via the minimal asset process route) and 1,114 protected trust deeds.

Figure 6: Total individual insolvencies were lower in Q1 2021 than in Q1 2020

Scotland, Q1 2011 to Q1 2021, non-seasonally adjusted

Source: Accountant in Bankruptcy, Scotland

The long-term series prior to Q1 2011 can be found in the excel and csv files that accompany this release.

In April 2015, the Minimal Asset Process replaced LILA, and other changes affected sequestrations, resulting in a large decrease during Q2 2015.

More detail can be found in the Accountant in Bankruptcy statistical release

5. Individual insolvency in Northern Ireland

Individual insolvency in Northern Ireland is governed by separate, but broadly similar, legislation to England and Wales, and so figures are presented separately.

In Q1 2021 there were 424 insolvencies, down 32% on the same quarter of 2020. This comprised 321 IVAs, 74 DROs and 29 bankruptcies.

Figure 7: Total individual insolvencies were lower in Q1 2021 than in Q1 2020

Northern Ireland, Q1 2011 to Q1 2021, non-seasonally adjusted

Source: Department for the Economy

The long-term series prior to Q1 2011 can be found in the excel and csv files that accompany this release.

6. Data and Methodology

6.1 Data Sources

Individual insolvency data for England and Wales were sourced from the Insolvency Service case information system (ISCIS), data for Scotland were sourced from the Accountant in Bankruptcy (AIB), and data for Northern Ireland from the Department for the Economy.

Population estimates for persons over the age of 18, as published by the Office for National Statistics were used to calculate individual insolvency rates. For 2020 and 2021, for which population estimates were not yet available, the 2018-based population projections were used.

More information on the administrative systems used to compile insolvency statistics can be found in the Statement of Administrative Sources.

6.2 Methodology and data quality

Seasonal adjustment

To aid analysis between quarters, underlying data for England and Wales were adjusted where there was evidence of seasonality to minimise the effect of the time of year and provide a true picture of the trends in insolvency. Full details on the models used to adjust the data can be found in the Seasonal Adjustment Review published in April 2020.

The data series for Scotland and Northern Ireland do not demonstrate consistent seasonality and only the unadjusted series have been presented, as agreed with the appropriate officials in the devolved administrations. The seasonal adjustment models for England and Wales are typically reviewed on an annual basis, in accordance with the Insolvency Service Official Statistics Revisions Policy. However, the trend in individual insolvencies during the 2020 reflected a very different pattern to that seen in previous years; largely a result of the coronavirus (COVID-19 pandemic). Therefore the 2021 review was not conducted and data for 2021 will continue to be seasonally adjusted using the 2020 model.

Rates of insolvency in England and Wales

Insolvency rates were calculated by dividing the total number of individuals entering insolvency in the previous twelve months by the mean average number of persons aged 18 residing in England and Wales over the corresponding period.

Main quality and coverage issues to note

1. Data for the latest quarter were extracted approximately ten working days after quarter end. There is an increased likelihood that data on individual insolvencies may be revised in the future due to potential delays in data being entered onto Insolvency Service administration systems. Therefore, these statistics for the latest quarter are provisional and marked with a ‘p’.

2. These statistics may not equal the sum of monthly statistics, published separately, which cover the period January 2019 to March 2021, due to differing methodologies including seasonal adjustment. In addition, the administrative systems used to capture data are live systems and are subject to amendments.

3. Bankruptcy statistics by employment status, and industry breakdowns for those who were self-employed, are less timely than all other individual insolvency statistics, and are reported one quarter in arrears. This is because it can take several weeks for employment status to be recorded following the date of the bankruptcy order. Therefore, numbers for the latest quarter are not presented due to the known large undercount.

Detailed methodology and quality information for these statistics can be found in the accompanying Quarterly Statistics Methodology and Quality document.

6.3 Revisions

These statistics are subject to scheduled revisions, as set out in the published Revisions Policy. Other revisions tend to be made as a result of data being entered onto administrative systems after the cut-off date for data being extracted to produce the statistics. Any revisions to these statistics will be marked with an ‘r’ in the relevant table.

Non-routine revisions since previous release

In previous editions of these statistics, revisions to the numbers of self-employed bankruptcies, income payment agreements (IPAs) and income payment orders (IPOs) covered only the financial year of the release. In this release, all quarters since Q1 2011 have been revised in accordance with the published Revisions Policy. This has resulted an increase in the reported numbers in Tables 4a, 4b, 5a and 5b, as well as the Trader Bankruptcy by Industry tables, which now more accurately include late reports of self-employment status, as well as IPOs and IPAs with a long gap between bankruptcy date and order date.

An error was discovered in Tables 5a and 5b in previous releases, in which for Q4 2011 to Q4 2016, the values for all columns except the total bankruptcies column were assigned to one quarter later than was correct. The error has been corrected for this release.

Further details on routine and non-routine revisions can be found in the accompanying Quarterly Statistics Methodology and Quality document.

7. Glossary

7.1 Key terms used within this statistical bulletin

Bankruptcy	A form of debt relief available for anyone who is unable to pay their debts. Assets owned will vest in a trustee in bankruptcy, who will sell them and distribute the proceeds to creditors. Discharge from debts usually takes place 12 months after the bankruptcy order is granted. Bankruptcies result from either Debtor application – where the individual is unable to pay their debts, and applies online to make themselves bankrupt, or Creditor petition – if a creditor is owed £5,000 or more, they can apply to the court to make an individual bankrupt. These statistics relate to petitions where a court order was made as a result, although not all petitions to court result in a bankruptcy order.
Debt Relief Order (DRO)	A form of debt relief available to those who have a low income, low assets and less than £20,000 of debt. There is no distribution to creditors, and discharge from debts takes place 12 months after the DRO is granted.
Deed of Arrangement	An alternative way for a debtor to deal with their affairs than entering into bankruptcy or an individual voluntary arrangement. Deeds of arrangement require the approval of a simple majority of creditors in number and value, and do not require a nominee, report to court or a meeting of creditors to be held.
Income payment orders (IPOs) and agreements (IPAs)	If a Bankrupt has a higher income than needed to pay for their reasonable day-to-day living expenses, the Trustee in Bankruptcy may ask them to make payments towards their Bankruptcy Estate for the benefit of creditors. The Trustee in Bankruptcy may ask a Bankrupt to enter into an Income Payments Agreement (IPA) and if the Bankrupt refuses to enter into an IPA, the Trustee in Bankruptcy can apply to the Court for an Income Payments Order (IPO).
Individual Voluntary Arrangement (IVA)	A voluntary means of repaying creditors some or all of what they are owed. Once approved by 75% or more of creditors, the arrangement is binding on all. IVAs are supervised by licensed Insolvency Practitioners.
Protected Trust Deeds	Protected trust deeds are voluntary arrangements in Scotland and fulfil much the same role as IVAs in England and Wales. However, there are differences in the way they are set up and administered, meaning the figures shown here are not consistent with those provided for England and Wales.
Restructuring Plan	New restructuring measures were introduced under the Corporate Insolvency and Governance Act 2020 to support viable companies struggling with unmanageable debt obligations to restructure under a new procedure. They allow the court to sanction a plan that binds creditors to a restructuring plan if it is fair and equitable. Creditors vote on the plan, but the court can impose it on dissenting classes of creditors (‘cram down’) provided that the necessary conditions are met.
Sequestration	Fulfils much the same role in Scotland as bankruptcy in England and Wales. On 1 April 2008, Part 1 of the Bankruptcy and Diligence etc. (Scotland) Act 2007 came into force making significant changes to some aspects of sequestration (bankruptcy), debt relief and debt enforcement in Scotland. This included the introduction of the new route into bankruptcy for people with low income and low assets (LILA). On 1 April 2015, part of the Bankruptcy and Debt Advice (Scotland) Act came into force making significant changes to some aspects of sequestration (bankruptcy). This included the introduction of the Minimal Asset Process (MAP), which replaced the LILA route into sequestration; mandatory debt advice for people seeking statutory debt relief; a new online process for applying for sequestration; and an additional year for people to make contributions to repaying their debts (increasing from three years to four, in line with protected trust deeds).
Standard Industrial Classification (SIC 2007)	Used in classifying business establishments and other statistical units by the type of economic activity in which they are engaged. Further information can be found on the ONS website.