If you had to guess, how many IVAs do you think were registered in England and Wales during 2022? 100,000? 4,500? A million?
The number of new Arrangements recorded, 87,967, was the highest 'since records began' (in 1990), half of them going to the four biggest players on the market. You only have to go back to 2015, when only 40,000 new IVAs were registered, to understand the extent of that growth and the potential in the market. On the flipside of that, two of the top ten operators went bust last year; The IVA Advisor in August, followed by QIS in October.
Tracking back a little further, in May of last year Vanguard Insolvency Practitioners Limited, MDN Consultancy Limited, Newtco Limited and KIS Financial Consultancy Limited were wound-up in the public interest at the High Court in Manchester. Following complaints about Vanguard’s practices, however, the Insolvency Service launched confidential enquiries before investigators uncovered serial abuse of the payments made by Vanguard’s customers. This clearly isn't an easy and profitable market to operate in.
Let's dive a little deeper into the numbers. In England and Wales, one in 18 IVAs (5.5 per cent) registered with the Insolvency Service in 2021 terminated within one year of being approved. This was lower than the one-year termination rates in 2015-2019, but higher than the record low one-year termination rate in 2020, which coincided with the revised IVA protocol in response to the COVID-19 pandemic. Two- and three-year IVA termination rates of 10.3 per cent and 17.5 per cent (for IVAs registered in 2020 and 2019 respectively) were lower compared to IVAs registered in the preceding years.
Termination rates over the lifetime of an IVA increased from approximately one in four for IVAs registered between 2012 and 2014 to one in three for IVAs registered in 2016 and 2017. Many IVAs registered in 2018 or later remained ongoing as at 31 December 2022. On the back of these number a definitive trend cannot yet be established, but there are preliminary indications of a decline in lifetime termination rates.
To place these numbers into context, IVAs accounted for nearly three-quarters (74%) of all individual insolvencies, compared to 64% in 2019 and less than 50% before 2014. Put simply, over the past ten years, the number of IVAs has increased, while numbers of other individual insolvency types (principally Bankruptcy) have stayed constant or decreased.
We in the NTI newsroom asked Tracee to do a little research. She plugged the words 'Trouble paying my debts' into Google. Over the next three pages, Citizens Advice aside - bobbing around like a small blue swimming cap in a massive turbulent ocean - the offerings are all IVA volume providers. We all know that anyone with property would be nuts to opt for a Bankruptcy and the numbers show that the message is getting through.
Do IVAs work? The most common annual period for an IVA to fail is between one and two years after approval. However, for IVAs registered between 2012 and 2015, over half of all terminations occurred more than two years after they were approved. This does not appear to be the case for IVAs registered between 2016 and 2018, for which earlier terminations were more common than in previous years. As we don't have figures for years three onwards for IVAs registered in 2020 and after the statistics are incomplete.
However, the one-year termination rate for IVAs registered in 2021 was 5.5 per cent. This is higher than the one-year termination rate in 2020 ( which was 3.9 per cent), which was the lowest termination rate recorded in the time series back to 1990, but less than the 8 per cent termination rate for IVAs registered in 2016, 2017 and 2018. The two-year termination rate of 10.3 per cent for IVAs registered in 2020 was the lowest in the time series back to 1990.
