2017 a challenging year ahead?

The Insolvency Service has released the insolvency statistics for the final quarter of 2016 and whilst there has been only a marginal increase in corporate insolvencies there has been a significant increase in personal insolvencies compared to 2016. Whilst the number of people becoming bankrupt has continued to decline, the increase in personal insolvencies has been driven by a small increase in Debt Relief Orders (primarily due to a change in the eligibility criteria) and a substantial increase in Individual Voluntary Arrangements.

It should be noted however that despite the increase from 2016, personal insolvencies are still at the second lowest level in 11 years.

With house prices continuing to increase and with UK household debt rising at its fastest rate for a decade, the true extent of personal insolvency may well be hidden from view particularly as there are no official statistics for the number of people entering into an informal arrangement with their creditors. Household debt has now risen to an average of almost £13,000 per household equating to £349 billion across the UK (£192 billion excluding student loans).

As employment levels remain high and whilst inflation and interest rates remain low, people may not be overly concerned with servicing their debt. However, as more and more families, particularly young families, become increasingly reliant on borrowing, the more likely it is that they will borrow more than they can afford to repay, particularly if there are changes in the economy. We expect that 2017 will be a challenging year and we may well see the number of personal insolvencies continue to increase during 2017.