The number of people across England and Wales registering for “breathing space” from their debts jumped by 26% in the second quarter of this year compared with the same period in 2022, according to the Insolvency Service.
Some 21,232 breathing space registrations were recorded in the second quarter of 2023.
Within the total, 20,919 were standard registrations and 313 were mental health breathing space registrations.
A standard breathing space is available to people with problem debt and gives legal protections from creditor action for up to 60 days.
A mental health crisis breathing space is available to someone who is receiving mental health crisis treatment. It lasts as long as the person’s mental health crisis treatment, plus 30 days.
The Insolvency Service’s figures also showed the number of people across England and Wales going into personal insolvency was 11% lower than in the second quarter of 2022.
Some 26,390 personal insolvencies were recorded in the second quarter of 2023, which was also 8% lower then in the first quarter of this year.
Individual voluntary arrangements (IVAs) made up two-thirds (66%) of personal insolvencies in the second quarter of this year, with debt relief orders (DROs) making up 27% and bankruptcies the remaining 7%.
The number of bankruptcies registered in the second quarter of 2023 increased by 4% from the previous quarter and by 11% from the same quarter last year.
Bankruptcy numbers in the first half of 2023 increased from the 40-year low in 2022, the Insolvency Service said.
The number of DROs also increased compared with the previous quarter and the second quarter of 2022, while the number of IVAs fell, both compared with the previous quarter and the second quarter of 2022.
Company insolvencies rose to their highest quarterly level since 2009.
Between April 1 and June 30 2023, 6,342 company insolvencies were registered across England and Wales.
The number of company insolvencies in the second quarter of 2023 was the highest since the second quarter of 2009, 9% higher than in first quarter of 2023 and 13% higher than in the second quarter of 2022.
The number of creditors’ voluntary liquidations (CVLs), at 5,240, was the highest quarterly level since records started in 1960, the Insolvency Service said.
From the start of the Covid-19 pandemic until mid-2021, numbers of company insolvencies had been low when compared with pre-pandemic levels.
This is likely to have been driven in part by Government fiscal and other measures that were put in place to give support during the pandemic, the Service said.
Andy Nalliah, personal insolvency partner at audit firm RSM UK, said: “IVA registrations have dropped significantly when compared against both the previous quarter and the same quarter last year.
Many people will be starting to feel the bite of hiked interest rates as their fixed-term mortgages come to an end and this could be a key driver behind the 22% drop in IVAs compared to the same quarter last year
Andy Nalliah, RSM UK
“This could suggest the pandemic trend of higher-than-normal IVA registrations is now slowing.
“Furthermore, despite a recent slowdown in inflation, energy prices and the cost of groceries, the drop in IVAs could reflect the debtor’s lack of confidence in their own ability to service the financial commitments associated with an IVA.
“Many people will be starting to feel the bite of hiked interest rates as their fixed-term mortgages come to an end and this could be a key driver behind the 22% drop in IVAs compared to the same quarter last year.”
Nicky Fisher, president of insolvency and restructuring trade body R3, said: “More and more businesses are running out of road or rope. Directors are choosing to close down their firms while the decision is still theirs.”
She added: “The rise in bankruptcies and debt relief orders suggests that more people are unable to make almost any kind of contribution to repaying their debts this quarter, so have turned to these processes in an attempt to resolve their financial issues.
“Making ends meet is still a key concern for many. People are living in a world where it costs more to keep a roof over their head, put food on the table and keep the lights on, so they’re only spending money on the essentials.
“Alongside their money worries, job security and the health of the economy are key concerns for many people – while rising interest rates could affect their ability to pay or secure mortgages in the future, and inflation levels will continue to push costs up.”
Ms Fisher said: “Anyone who is worried about their business or personal finances should seek advice as soon as possible.”
