Accredited official statistics

Methodology and Quality Document - Individual Insolvency Statistics July to September 2022

Published 28 October 2022

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 Official 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.

Once statistics have been designated as National Statistics it is a statutory requirement that the Code of Practice shall continue to be observed.

1. Data Sources and data validation

Aggregate data for Northern Ireland were sourced from the Department for the Economy. Aggregate data for Scotland were sourced from the Accountant in Bankruptcy (AiB), as published in their quarterly statistical series on the AIB website. The Insolvency Service does not conduct any further validation on these aggregate data.

Individual-level data for England & Wales were sourced from the Insolvency Service Case Information System (ISCIS). Duplicate records are removed, with specific focus on self-employed bankruptcy data and data on income payment orders (IPOs) and income payment agreements (IPAs).

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 2021 and 2022, for which population estimates were not yet available, the 2020-based population projections were used.

Breathing space data were sourced from the Breathing Space register, owned by HM Treasury (HMT), for which the Insolvency Service is a custodian. Some automated validation checks are made on the individual breathing space data, such as ensuring that dates are formatted correctly. However, data are extracted from the breathing space register in aggregate form to protect the identity of individuals and therefore the Insolvency Service does not conduct any further validation on these aggregate data.

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

2. Methodology

2.1 Seasonal adjustment of data

Seasonal Adjustment is the process by which patterns in a data series that are due to seasonal or other calendar influences are removed to produce a clearer picture of the underlying behaviour of the data. This process enables quarter-on-quarter comparisons to be made.

Most data series for England and Wales have been tested for seasonality, as described in the latest review of seasonal adjustment. The 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.

Seasonal adjustment was carried out using the X13-ARIMA-SEATS program (developed by the US Census Bureau), the recommended program for UK National Statistics.

The seasonal adjustment models for England and Wales are reviewed on an annual basis, in accordance with the Insolvency Service Official Statistics Revisions Policy.

Full details of the 2022 seasonal adjustment review and the models used to adjust these data can be can be found on the Gov.uk website.

2.2 Calculation of rates

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

The rates presented for each quarter reflect a four quarter rolling rate per 10,000 adults in England and Wales. Therefore, the Q3 2022 rates, for example, were calculated using data covering the period Q4 2021 to Q3 2022. The insolvency rate gives an indication of the probability of an individual becoming insolvent in the previous four quarters. As the rates are calculated as a proportion of the total number of adults in England and Wales, they are more comparable over longer time periods than the absolute numbers.

2.3 Tabulating numbers of individual insolvencies

The main series of individual insolvency tables present the overall numbers of individual insolvencies in each quarter since January 2012, as well as annual totals. Tables 1a and 1b present seasonally adjusted and non-seasonally adjusted tables for England and Wales. The commentary for these statistics refers to the seasonally adjusted figures so that reliable quarter-on-quarter comparisons can be made. Table 7 presents the non-seasonally adjusted numbers for Scotland. Table 8 presents the non-seasonally adjusted numbers for Northern Ireland.

Tables 3a to 5b provide more granular detail on individuals that have been become bankrupt.

Numbers of bankruptcies by employment status are presented in table 4a and 4b. Table 4b presents the number of consumer bankruptcies broken down into ‘other individuals’ and ‘unknown individuals’. ‘Other individuals’ includes employment status’s “non-trading” and non-surrender. ‘Unknown individuals’ includes those that are unknown. For seasonal adjustment (Table 4a), the ‘unknown’ and ‘other’ categories have been grouped together.

Bankruptcy and Debt Relief Order (DRO) data for England & Wales were tabulated by insolvency type and calendar month of order or agreement.

Individual Voluntary Arrangements (IVAs) in England & Wales were counted within these statistics in accordance with the quarter in which they were registered with the Insolvency Service. Note that there is often a time lag between the date on which the IVA is accepted (known as the date of creditor agreement) and date of registration by licensed insolvency practitioners working for firms that specialise in this area. Therefore, these data can be volatile.

Aggregate counts of breathing space registrations are provided, tabulated by quarter of registration on the breathing space register.

Individual insolvency rates for England and Wales are presented in Table 2. Rates are not provided for Scotland and Northern Ireland.

2.4 Tabulating insolvency by industry tables

The additional series of accompanying industry tables presents quarterly numbers of ‘trader bankruptcies’ by industry in accordance with the 2007 Standard Industrial Classification (SIC). Trader bankruptcies are defined as bankrupts who self-declared themselves as self-employed at time of bankruptcy.

Trader bankruptcy data held by the Insolvency Service includes primarily the 2003 Standard Industrial Classification (SIC). These 2003 SIC codes have been converted to 2007 codes using a ‘best match’ approach using weighted tables provided by the Office for National Statistics. Where more than one SIC code is recorded for a trader bankruptcy, only the first listed, or the primary, code is used.

These statistics present trader bankruptcy data for England and Wales to the three-digit SIC 2007 level. Statistics are not presented for Scotland and Northern Ireland since these aggregate data are not supplied to the Insolvency Service.

For information on SIC 2007, including its structure and more detailed information on which industries are included, please see the Office for National Statistics website.

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 future revisions will be marked with an ‘[r]’ in the relevant tables.

The number of IPOs and IPAs have been revised in the Q3 2022 publication following validation checks and subsequent updates to the administrative system, including the entry of previously missing dates for some IPAs. These changes have resulted in more revisions than usual. In particular, the number of IPAs have increased in almost all years between 2012 and 2021, as shown in table 5b/5c. These increases ranged from 0.1% to 1.4%, with no more than 23 additional cases added in any given year.

4. Quality

This section provides information on the quality of these quarterly individual insolvency statistics, to enable users to judge whether the data are of sufficient quality for their intended use.

The section is structured to align with the Quality Assurance Framework of the European Statistical System for statistical outputs.

Relevance: The degree to which the statistical product meets user needs in both coverage and content.

These statistics present individual insolvencies for England & Wales, Scotland and Northern Ireland and are the most comprehensive record of the number of individual insolvencies in the UK.

Key users of insolvency statistics include the Insolvency Service itself, which has policy responsibility for insolvency in England & Wales and for the non-devolved areas within Scotland and Northern Ireland; other government departments; parliament; the insolvency profession; debt advice agencies; media organisations; academics; the financial sector; the business community and the general public. Insolvency statistics are typically widely reported in national, regional and specialist media on the day of release. Key users of the breathing space statistics include HM Treasury, which has policy responsibility for the scheme, as well as debt advice agencies, media organisations and the general public.

The statistical production team welcomes feedback from users of the Insolvency Statistics and can be emailed at [email protected].

Accuracy and Reliability: Accuracy is the proximity between an estimate and the unknown true value. Reliability is the closeness of early estimations to subsequent estimated values.

All formal insolvency procedures entered into by a company, a partnership or an individual are required by law to be reported to the appropriate body, so Insolvency Service statistics should be a complete record of insolvency in the United Kingdom.

Numbers of insolvency cases are typically based on the date they were registered onto the relevant administrative recording system, and so it should be noted when making comparisons of trends over time, that trends can be influenced by late reporting.

The impact of delayed reporting is particularly an issue for IVAs. IVAs are counted within the statistics once they are registered with the Insolvency Service and are reported by quarter of registration date. There can be a time lag between the date on which the IVA is accepted (known as the date of creditor agreement) and date of registration by licensed insolvency practitioners working for firms that specialise in this area. This time lag can lead to volatility in the data from one quarter to the next and create difficulty in constituting reliable short-term trends, since changes over time may be partly a result of IVA provider activity. The IVA data are seasonally adjusted but trends over time may still not be reliable due to volatility in the data.

Some checks are in place to identify and remove duplication of cases, to ensure that returns cover all reporting areas, and to check consistency within tables and between related tables.

Note that data are extracted from live administrative systems and therefore subject to routine revisions as systems are updated.

Timeliness and Punctuality: Timeliness refers to the elapsed time between publication and the period to which the data refer. Punctuality refers to the time lag between the actual and planned dates of publication.

Quarterly individual insolvency data were extracted approximately five working days after latest quarter end.

Typically, these statistics are scheduled to be released one month after quarter end. This is to allow time to extract and compile the statistics. Additionally, the quarterly individual insolvency statistics cannot be published ahead of the release of quarterly statistics for Scotland published by the Accountant in Bankruptcy (AiB).

Top-level AiB statistics to Q3 2022 (published on 26th October 2022) were presented within these individual insolvency statistics.

Where a scheduled release date falls on a Monday the scheduled release has been pushed forwards by a day, to the Tuesday, to ensure compliance with the Pre-release Access to Official Statistics Order.

The publication schedule for these statistics, and all other Insolvency Service statistics, can be found on the UK National Statistics Publication Hub.

Comparability and Coherence: Comparability is the degree to which data can be compared over time and domain. Coherence is the degree to which data are derived from different sources or methods, but refer to the same topic, are similar.

The Insolvency Service also publishes monthly insolvency statistics. The sum of these quarterly statistics may not equal previously published monthly statistics since the data were extracted at different times from live administrative systems which are subject to amendments.

The Gazette (formally the combination of three publications: The London Gazette, The Belfast Gazette and The Edinburgh Gazette) is an official journal of record consisting of statutory notices, including bankruptcies. The timings of the publication of Gazette notices and the start of the bankruptcy may differ and therefore the numbers of bankruptcies in a specified time period may not align.

Individual insolvencies in Scotland are compiled and published separately by the Accountant in Bankruptcy (AiB). The Insolvency Service incorporates individual insolvencies in Scotland into the quarterly individual insolvency statistics for completeness. Therefore, these statistics should align.

Accessibility and Clarity: Accessibility is the ease with which users are able to access the data, also reflecting the format in which the data are available and the availability of supporting information. Clarity refers to the quality and sufficiency of metadata, illustrations and accompanying advice.

Insolvency Statistics are available free of charge to the end user on the Gov.uk website and they meet the standards required under the Code of Practice for Official Statistics.

The accompanying data tables are formatted in line with current guidance for producers of official statistics to help improve the usability, accessibility and machine readability of spreadsheets. The Government Statistical Service are continuing to review this guidance and so the presentation of these statistics may change in the future.

Historical insolvency data are also published for the key series, on the National Archives website.

Views on the clarity of the publication are welcomed via email: [email protected].