The Insolvency Service recently released some interesting statistics, including figures showing that, for the first time, women are more likely than men to become insolvent.
2014 sees a further decline in the number of individual insolvencies
The latest report published by the service includes insolvencies during 2014 in England and Wales by age, gender and location. The overall total number of individual insolvencies has continued to decline since 2009, with a peak of 30.9 out of 10,000 adults. The 2014 figures show a further fall to 21.8 out of 10,000 adults, which, while encouraging, is still far higher than the figures for 2000, when just 7.2 out of 10,000 adults became insolvent. There appear to be a number of contributing factors behind the rapid increases in insolvencies and the more recent steady decline, not least the recession and the subsequent recovery we are currently experiencing. Other factors include the vast volume of Individual Insolvency Arrangements registered from 2004 to 2006, along with the 2009 introduction of Debt Relief Orders and the subsequent rise in the use of such methods.
The most surprising figures published in the report relate to the number of women who became insolvent in 2014 and the fact that, for the first, this figure was higher than the number of men who declared insolvent. The individual rate of insolvency out of 10,000 adults was 22.2 for women and 21.2 for men. The report goes on to explain that the primary reason for the increase in female insolvencies was due to a higher percentage of Debt Relief Orders being approved for females than males.
Furthermore, the decline in the individual rate of insolvency seen during the last few years in England and Wales has been more pronounced amongst men than women. Looking at age groups, 35-44-year-olds were responsible for the highest rates of insolvency in both men and women. Across all age groups, from 18 to 54 years old, the rates of insolvency amongst females were higher. Overall, the individual rate of insolvency declined across all age groups in 2014 compared to the previous year, other than amongst 18-24-year-olds, where there was a slight increase in the number of insolvencies.
Further examination of the figures makes it clear that Debt Relief Orders, first introduced in 2009 to address the ever-increasing number of low-value consumer debts, have no doubt had a significant impact on female insolvency figures. It appears that women are more inclined to apply for a debt relief order than men, which may be a result of the less stringent entry requirements compared to the other more traditional routes to insolvency.
Company insolvencies also show improvement
Moving on to company insolvencies, there is some good news for long-suffering creditors. The latest figures show a further decline in the number of corporate insolvencies during the second quarter of 2014. Indeed, the figures presented are lower than at any time since the fourth quarter of 2007.
The information provided in the Insolvency Service report indicates that the number of companies becoming distressed is shadowing recent economic growth. There was a decline in the fourth quarter in the number of companies in England and Wales that were declared insolvent. The figure is now lower than at any time since the third quarter of 2005.
Overall, the number of debt relief orders, voluntary arrangements, and insolvencies declined during each of the four previous quarters, while individual voluntary arrangement applications were at the lowest level since the first quarter of 2006.
The number of companies entering formal insolvency during the second quarter of 2015 was 3,908, a fall of 7.5% compared to the second quarter of 2014. This decline has been evident and has continued since the first quarter of 2013.
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In our opinion, while it has taken much longer than expected, increases in wages are finally higher than inflation, and some, but not all people, are managing to repay debts without recourse to insolvency methods. There is no doubt that the surge in insolvencies that resulted from the credit boom prior to the recession is finally over.
Similarly, businesses have been able to reduce historical debt and are benefiting from the improved economic outlook, enabling them to avoid the spectre of insolvency, at least in the short term.