IVAs Rise by 4.3% in the First Quarter of 2008
IVAs are on the rise again, the latest quarterly statistics from the Insolvency Service reveal, up 4.3% compared to the previous quarter to 9,614. Bankruptcies also rose marginally, up 0.1% to 15,651. These increases are not surprising. Most insolvency experts have long been suspicious of the downturn in IVAs that occurred at the end of last year, particularly against a backdrop of spiralling personal debt. Most agreed that it was not due to falling demand, but instead down to the increased rejection rate of IVAs. As the cost of living rises and house prices tumble, it would be very strange if personal insolvencies had not risen accordingly.
That IVAs have begun to increase in number is of little surprise, given the almost apocalyptic predictions for personal insolvencies this year. Indeed, what is more surprising is how little they have increased, relatively speaking. Just over 25,000 people went insolvent in the first quarter. If the trend continues, over 100,000 will be insolvent by the end of the year, but this is nowhere near the 130,000 predicted by KPMG. This may well be the calm before the storm, of course, if there is a surge in solvency later on this year, but it has not happened just yet.
It is important to keep the changes in perspective. While IVAs have increased by 4.3% compared to the previous quarter, they are still down a massive 22% compared to the same time last year. We are nowhere near an insolvency crisis just yet, as we are not even up to the number of IVAs being taken out at the beginning of last year, when the economy was booming. And, strangely enough, it is good to see that IVAs are being approved again. Whether or not this is due to seriously increased demand or down to the code of practice agreed by banks and IPs earlier this year, it isn’t known. But this increase in insolvencies, small as it is, is a warning sign, and could be an indication of more serious problems to come in the year ahead.
