Why are personal insolvency rates higher in the North East than anywhere else?

Personal insolvency experts analyse latest official figures

A man suffering stress due to debt
More people in the North East are struggling with debt than anywhere else

The North East remains the UK’s hotspot for personal insolvency despite the UK seeing a drop in the number of individuals turning to debt relief organisations to help them get back on their feet.

Following the economic crisis the rate of total individual insolvencies per 10,000 adults in England and Wales hit a peak of 30.9 in 2009, but the average rate has gradually declined in recent years to reach a rate of 22.4 in 2013.

However, the rate for the North East remains high, at 30.6 per 10,000 adults – and the region has had the highest rate since 2008.

Allan Kelly, North East chair of insolvency trade body R3 and a restructuring partner in the Sunderland office of Baker Tilly, said it’s clearly an issue for the North East that the trend has endured for so long.

He said: “Rates are highest in seaside towns which can be attributed to the nature of the labour market in these places explaining why personal insolvency is so prevalent, as unemployment is much higher than elsewhere or the available jobs are short-term, seasonal and/or low-paid.

“The North East has the highest unemployment rate of any part of England and Wales with the region’s economy still not fully replacing the loss of jobs from the traditional heavy industries, although gains have clearly been made in many other sectors, such as oil & gas, renewables, tourism and the knowledge economy.”

The North East also had the highest rates of bankruptcy and IVA in 2013, but the South West had the highest rate of Debt Relief Order (DRO) in 2013. London had the lowest rates for each type of individual insolvency.

Women aged between 18 and 24 were also almost twice as likely than men in the same age group in 2013 to have seen their situation deteriorate to such an extent that they were tipped over the edge financially, according to Insolvency Service figures.

The rate of women in this age group becoming insolvent in 2013 was 7.8 for every 10,000 people in this age band, compared with a rate of 4.0 for men.

Men are still generally more likely than women to be tipped into insolvency, but only just.

In 2009, the insolvency rate for women was 26.0 per 10,000 adults, whereas for men the rate was 35.5.

But now, the overall insolvency rate for women is 22.2 per 10,000 adults, while the male insolvency rate is only marginally higher, at 22.6.

In two regions – the South West and the North East – female personal insolvency rates are now higher than those for men.

Mark Sands, Baker Tilly personal insolvency partner said: ‘‘The figures provide a more detailed analysis of the downward trend in personal insolvencies last year, but we have seen a small increase in the first quarter of 2014 and this could rise further.

“Despite some mixed messages from the Bank of England, it does look likely that rates will have to rise at some point this year or next, and this is bound to push some hard-pressed borrowers over the edge – particularly those who have become too reliant on rock bottom rates over the last five years.

‘The statistics show that the gap between the number of men and the number of women entering an insolvency procedure is diminishing and in four regions – the North East, East Midlands, the South West and Wales - more women than men are affected.

“What’s also interesting is that we are seeing a marked difference in the gender make-up in different age groups. Below the age of 35, significantly more women than men are entering some kind of insolvency procedure, and over this age, the trend is reversed.”

Allan Kelly also commented on the difference in insolvency rates between men and women under and over 35 years old.

Allan Kelly
Allan Kelly

He said: “Although middle-aged or older men are slightly more likely to experience insolvency than women the same age, younger women are far more likely to become insolvent than their male counterparts.

“While it’s welcome that the levels of personal insolvency in England and Wales have continued to fall from their 2009 peak, it’s important to remember that the official statistics don’t capture those people in informal debt management plans.

“The most recent R3/ComRes survey of Britain’s personal debt concerns found the equivalent of 2.4 million British adults saying they were in one of these, so the official statistics clearly do not tell the full personal insolvency story.

“Unlike formal insolvency procedures, like bankruptcies or debt relief orders, debt management plans are not regulated and may not be provided by people qualified to give expert, impartial financial advice.

“Unfortunately, it can be difficult for people to access a formal debt solution that is right for their situation. Court fees are a frequent obstacle, while some of the criteria for accessing options like debt relief orders can be too restrictive. This can leave some debtors with little choice but to opt for a debt management plan.”

“If you are suffering from financial stress, speak to a qualified insolvency expert”.


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