A higher percentage of women than men in England and Wales entered insolvency in 2017, continuing the trend of recent years, says insolvency trade body R3, commenting on the annual personal insolvency statistics released by the Insolvency Service.
Looking at the geographical spread in the statistics, the North East and coastal towns such as Plymouth and Scarborough typically had the highest concentrations of personal insolvencies, also following the pattern established in recent years. Stoke-on-Trent is the local authority with the highest rates of personal insolvencies.
The 2017 statistics show that 53.9% of insolvencies involved a woman, up from 30% in 2000 and 53.4% in 2016 indicating that:
- There were 22.6 insolvencies per 10,000 women in 2017 compared to 20.2 insolvencies per 10,000 men. There were 21.4 insolvencies per 10,000 for all adults.
- Women were involved in 65.4% of Debt Relief Orders, 53% of Individual Voluntary Arrangements, and 38.6% of bankruptcies.
Mark Sands, Chair of the Personal Insolvency Committee at R3, said “The statistics for 2017 carry on the pattern which we have seen over the last few years, of women being persistently more likely to enter an insolvency procedure than men, with the gap widening to become even greater than in 2016.
“Many factors feed into this gender disparity. For example, women are much more likely than men to work part-time, and in sectors and roles with lower pay; women are often paid less than men for performing comparable work, as the gender pay gap shows; they are more likely to be single parents, which has a high correlation with greater poverty levels; and previous Insolvency Service statistics showed women were more likely than men to enter bankruptcy as a result of relationship breakdown.
“A number of factors have increased women’s insolvency rates over the last few years, not least the introduction of Debt Relief Orders [DROs] in 2009 and their subsequent expansion a couple of years ago. DROs are designed to help people with low incomes, debts, and assets, and have been predominantly used by women. DROs have helped those who might not have been able to access an insolvency procedure otherwise.
“Overall, unemployment levels stayed relatively low across 2017, but in the context of zero hours contracts and the gig economy, just having a job can be less of a bulwark against insecurity and insolvency than it used to be.
“Women have a lower participation rate in the economy, with around 26% counted as economically inactive in 2017 compared with around 17% for men. People on fixed incomes, be they pensioners or benefits claimants, are more vulnerable to rises in inflation, as any increases in their incomes will lag behind real-world conditions; price rises across last year will have increased the pressures on household budgets.
“As R3 has said before, the stereotype that women become insolvent more than men due to profligacy just does not hold up when compared with the evidence. The form of insolvency which is most closely linked to consumer spending, an individual voluntary arrangement (IVA), is relatively equally used by men and women.
“Women’s relatively weaker financial position is underlined by the gender split in DROs, which are used when the debt in question is small, and the indebted individual has assets under £1,000. Two thirds (65.4%) of DROs were taken out by women, compared with 34.6% by men.
“Bankruptcy, meanwhile, is the one form of personal insolvency procedure which is more commonly used by men than women (61.4% of bankruptcies are taken out by men and 38.6% by women in the most recent statistics), and is often associated with business failure and higher debts.”
The number of DROs taken out in 2017 fell by around 5% compared with 2016, while the number of bankruptcies was essentially flat, rising by only 0.4% year on year. IVAs jumped by 20% year on year, and overall, individual insolvency numbers rose by 9% in 2017 compared with 2016.
Sands continued “As with the gender split, the geographical distribution of individual insolvencies also follows the patterns of recent years. The places which have the highest rate of personal insolvency tend to be seaside towns, in towns affected by the decline of a particular industry, and in the North East – where there is often a combination of both the other two factors. Although it’s not in the North East, Stoke, an area where industry has declined, tops the list of local authority personal insolvency rates.
“The problems facing seaside towns are well-known, and six of the 10 places with the highest rate of personal insolvency are by the sea. Seasonal work dries up over the winter, and when it is available, wages tend to be low. In more heartening news, however, the Government launched a £40 million fund in February to encourage investment and to boost jobs in coastal communities. The vibrant economies of seaside cities like Brighton show that coastal settlements can become prosperous, given the right conditions.”
“Areas where industry has receded face significant challenges. High levels of individual insolvencies are often accompanied by other issues, like poorer health and education outcomes. We’re still seeing the impact of industrial decline, decades later. Tackling economic malaise will require significant investment in building skills, resilience, business networks, and better infrastructure. Interestingly, London is the only place where bankruptcies – a procedure associated with higher levels of debts and assets – are more common with DROs – which are associated with low assets and low, but unaffordable debts.”
“Regional initiatives, such as the Northern Powerhouse and the Midlands Engine, are one way to bring public and private sectors together to boost investment and to build links, and more of a focus on such projects would be welcome news for people and businesses in post-industrial areas. Projects must also take care to look outside cities and larger towns to places where a spiral of decline has set in – the statistics show that places where levels of personal insolvency are high often exist side by side with much more prosperous areas.”
Insolvencies by Local Authority
|Local Authority||Insolvencies per 10,000 adults|
|Isle of Wight||37.4|
Also commenting on the figures Richard Haymes, Head of Financial Difficulties at TDX Group said “The figures released by the Insolvency Service today show rapidly increasing insolvency rates for those under 35, with 25-34 year olds seeing the largest annual rate of increase (5.7%) between 2016 and 2017. The main driver of this change is increasing cost of living pressures which disproportionally affect certain age groups. Under 35’s are much more likely to live in private or social rental properties, have an element of income coming from welfare benefits, find themselves limited to higher cost credit products, as well as suffer from limited wage growth and higher unemployment.”
“In contrast, there was a drop in the insolvency rate for people over 55 between 2016 and 2017. The lower cost of servicing mortgages has provided people in this age bracket, who are at risk of problem debt, with a much-needed buffer in their finances. The low interest environment has created a two-tier debt economy, with those on the right side of this line benefitting from cheap mortgages and reasonably low inflation, while others in rental properties experiencing higher living costs and becoming more likely to see credit transition into problem debt.”
Here is an overview of the key statistics from the Insolvency Service:
- The total insolvency rate increased for the second successive year, and increased in all regions of England and Wales between 2016 and 2017.
- The North East continued to have the highest insolvency rates, while London had the lowest.
- Eight out of ten local authorities with the lowest insolvency rates were in London, whilst six out of the ten areas with the highest rates were located in coastal areas.
- The insolvency rate for females was higher than the male rate for the fourth successive year, and the gap has continued to widen.
- Insolvency rates were highest in the 35-44 age group for males and 25-34 for females.
- Insolvency rates increased for all age groups except 55 and over, with those aged between 18-44 showing the biggest rises.