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Individual Insolvencies including Bankruptcies, England and Wales, 2001–11

Released: 14 September 2012 Download PDF

Abstract

This article from the Office for National Statistics (ONS) provides an ONS interpretation of regional and local differences in the rates of individual insolvencies in England and Wales from 2001 to 2011. It highlights the trends which have taken place since 2001 and identifies some of the possible reasons for these trends.

Introduction

This article from the Office for National Statistics (ONS) provides an ONS interpretation of regional and local differences in the rates of individual insolvencies1 in England and Wales from 2001 to 2011. Statistics on individual insolvency used in this article are supplied to the ONS Neighbourhood Statistics service (NeSS) by The Insolvency Service2. Statistics on individual insolvency can also be obtained from the regional statistics section of The Insolvency Service’s website.

The analysis and interpretation contained within this article has been carried out by ONS on data obtained from The Insolvency Service and contains no analysis or interpretation by The Insolvency Service itself. The analyses and data may be of interest to people who need to comprehend, establish and evaluate regional and local economic policy.

Notes for Introduction

  1. Individual insolvencies are categorised as Bankruptcy Orders, Individual Voluntary Arrangements (IVAs) and, from 2009, Debt Relief Orders (DROs). Definitions for these types of insolvency are outlined in Annex 1.

  2. For more information on The Insolvency Service, please see The Insolvency Service’s About Us webpage.

Key points

  • In 2011 the North East was the region with the highest total individual insolvency rate at 35.2 total individual insolvencies per 10,000 adults, twice that of London which has the lowest individual insolvency rate at 17.5 total individual insolvencies per 10,000 adults.
  • Total individual insolvency rates rose across the English regions and Wales between 2001 and 2011, increasing five-fold in the North East, where total individual insolvencies per 10,000 adults rose from 7.3 to 35.2.
  • Total individual insolvency rates generally peaked in 2009, while the number of individual insolvencies peaked in 2010.
  • Total individual insolvency rates began to rise dramatically from 2004, following the implementation of the Enterprise Act 2002 and then again in 2008, coinciding with the start of the recession.

Regional individual insolvency rates

Changes to bankruptcy law (the Enterprise Act 2002) came into force in England and Wales in 2004. These changes mean that bankruptcy could last for a minimum term of one year, rather than the two or three years required previously. However, those who have previously been made bankrupt or have been through criminal bankruptcy could face a term of bankruptcy for up to 15 years.

The total individual insolvency rate per 10,000 adults1 in the English regions and Wales from 2001 to 2011 is shown in Figure 1.

Figure 1: Total individual insolvency rates by region, 2001–11.

Total individual insolvency rates by region, 2001–11.

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Source: ONS chart produced using data from The Insolvency Service

Total individual insolvency rates were steady across the English regions and Wales in 2001 and 2002, at around six to eight per 10,000 adults. In 2003 rates started to rise, this could be due to people wanting to declare themselves insolvent before the introduction of the Enterprise Act 2002, which came into force in 2004.

From 2004 to 2006 total individual insolvency rates increased each year, at least doubling in all English regions and Wales, over the period. The largest rate increase was in the South West where total individual insolvencies per 10,000 adults rose from 13.9 to 30.3 (a rise in the rate of 16.4).

The largest percentage increase in rates was seen in the North East, where the rate rose by 151 per cent (from 10.6 total individual insolvencies per 10,000 adults to 26.6). The regional rates began to stabilise from 2006 to 2008, declining in the East of England, London, South East and South West and increasing slowly elsewhere.

In 2009 there was a sharp increase in total individual insolvency rates in all English regions and Wales, possibly due to the recession: with the loss of jobs and associated income. London saw the smallest percentage rise between 2008 and 2009, from 17.0 total individual insolvencies per 10,000 adults to 19.6 (a rise in the rate of 2.6, or 15.3 per cent), while Wales saw the largest percentage increase between 2008 and 2009, from 23.8 total individual insolvencies per 10,000 adults to 31.8 (a rise in the rate of 8.0, or 33.6 per cent).

From 2009 to 2011 regional rates have fallen between 3 and 17 per cent: with three regions, the East of England, London and the South East; having fallen below their 2006 levels (when individual insolvency rates peaked previously). The South West rate in 2011 (30.4) was only marginally higher than the South West rate in 2006 (30.3).

This is perhaps an indicator showing the extent to which the English regions and Wales have recovered from the effects of recession. In 2011 the North East was the region with the highest total individual insolvency rate at 35.2 total individual insolvencies per 10,000 adults, twice that of London which has the lowest rate at 17.5 total individual insolvencies per 10,000 adults.

Notes for Regional individual insolvency rates

  1. In individual insolvency statistics, an adult is defined as being an individual aged 18 years or older.

Local authority individual insolvency rates

There were wide differences in the percentage change in rates of individual insolvencies at local authority level from 2008 to 2011, shown in Map 1. The comparator year of 2008 was chosen as it appears to pre-date peaks in both the number of individual insolvencies and the individual insolvency rate, and appears to pre-date the impact of the recession. Just over one-third of local authorities showed a decrease in individual insolvencies over this period.

Map 1: Percentage change in individual insolvency rates by local authority, England and Wales, 2008–11

Percentage change in individual insolvency rates by local authority, England and Wales, 2008–11

The largest percentage changes in the total individual insolvency rate over the period 2008 to 2011 occurred in the two least populated local authorities: the Isles of Scilly and the City of London1: as such these areas should be treated with caution and the areas with the next largest changes should be noted. These areas are St Albans and Middlesbrough, both of which have adult populations in excess of 100,000, and as such any marginal change in the number of individual insolvencies within those areas should not have a significant impact on the insolvency rate.

Between 2008 and 2011 St Albans experienced the biggest decrease in the individual insolvency rate, excluding the City of London, falling 31 per cent (from a rate of 16.2 individual insolvencies per 10,000 adults to a rate of 11.1, representing a fall from 167 to 117 cases of individual insolvency). Middlesbrough experienced the biggest rise in the individual insolvency rate, excluding the Isles of Scilly, increasing by 76 per cent (from a rate of 16.0 to a rate of 28.2, a rise from 174 to 310 cases of individual insolvency).

Notes for Local authority individual insolvency rates

  1. Between 2008 and 2011 the total individual insolvency rate in the Isles of Scilly rose by 128 per cent (from a rate of 10.9 individual insolvencies per 10,000 adults to a rate of 24.8) whilst in the City of London it fell by 74 per cent (from a rate of 16.4 to a rate of 4.3). The Isles of Scilly are home to less than 2,000 adults and the City of London is home to around 11,000 adults. Due to the small population sizes of these areas, a marginal change in the number of individual insolvencies is likely to have a significant impact on the rate.Taking the local authorities identified: the Isles of Scilly rose from 2 individual insolvencies in 2008 to 5 in 2011, while the City of London fell from 17 individual insolvencies to 5 individual insolvencies over the same period.

Summary

The article provides an analysis of sub-national individual insolvency statistics. It highlights the trends which have taken place since 2001 and identifies some of the possible reasons for these trends.

Overall, individual insolvencies began to rise prior to the introduction of the Enterprise Act 2002, the total individual insolvency rate continued to rise until 2006. The rate then began to decline; it started to rise again in 2008, which coincides with the start of the recession. Rates of individual insolvency varied across the English regions and Wales over the period and varied considerably at local authority level.

There is scope for further analysis of the data available, including but not limited to:

  • more detailed local authority analysis of types of individual insolvency,

  • linking insolvency data with other statistics such as regional employment data or housing repossession data,

  • assessing the level of influence and impact things have had on individual insolvency statistics, such as quantifying the impact the recession has had, or the availability of finance and attitudes towards debt.

More information is available from the Neighbourhood Statistics website.

You can also find out more at the Individual Insolvencies by Region page on The Insolvency Service website.

A second article examining characteristics of individual insolvencies in 2011 is due to be published in October 2012 on the area based analysis section of the ONS website.

Annex 1: Definitions

The definitions used in this analysis have been taken from Regional Individual Insolvency Statistics 2000 to 2011.

Individual insolvency procedures include bankruptcy, debt relief orders (with effect from 6 April 2009) and individual voluntary arrangements:

  • Bankruptcy: a form of debt relief available for anyone who is unable to pay the debts they owe. Any assets owned will vest in a trustee in bankruptcy who will sell them and distribute the proceeds to creditors in accordance with the order laid down by statute.

  • Debt relief order: a form of debt relief available to those who owe £15,000 or less and have little by way of assets or income. There is no distribution to creditors, and discharge from debts takes place 12 months after the DRO is granted.

  • Individual Voluntary Arrangements – a voluntary means of repaying creditors some or all of what they are owed. Once approved by the majority of creditors, the arrangement is binding on all. Such arrangements are supervised by a licensed Insolvency Practitioner.

Additional information on all aspects of insolvency may be found on The Insolvency Service website.

Background notes

  1. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

Content from the Office for National Statistics.
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