Credit, Collections & Insolvency News
More women than men in England and Wales became insolvent in 2018, following a pattern which has been in place for several years, says insolvency trade body R3, commenting on the annual personal insolvency statistics released by the Insolvency Service. The statistics all showed that the total rate for personal insolvencies increased for the third successive year, and increased in all regions of England and Wales in 2018.
The North East and coastal towns such as Torbay and Blackpool typically had the highest concentrations of personal insolvencies with Stoke-on-Trent is once again the local authority with the highest rates of personal insolvencies.
The 2018 statistics show that 54.3% of insolvencies involved a woman, up from 30% in 2000 and 53.9% in 2017. There were 26.6 insolvencies per 10,000 women in 2018 compared to 23.3 insolvencies per 10,000 men. There were 25 insolvencies per 10,000 for all adults. Women were involved in 65% of Debt Relief Orders, 54% of Individual Voluntary Arrangements, and 38% of bankruptcies. Whilst Women aged between 25-34 were the group with the highest personal insolvency rate in 2018, at 49.9 per 10,000. They were followed by women aged 35-44 (47.5 per 10,000), and men aged 35-44 (40.7 per 10,000). The number of Debt Relief Orders (DROs) taken out in 2018 rose by around 11% compared with 2017, while the number of bankruptcies rose by 10% year on year. IVAs jumped by 20% year on year, and overall, individual insolvency numbers rose by 16% in 2018 compared with 2017.
Mark Sands, Chair of R3’s Personal Insolvency Committee, said “The gender split in insolvency is a sober reminder that women are more likely to be economically disadvantaged than men; they are more likely to work part-time, or in generally lower paid sectors. Women are also more prone to becoming insolvent following the breakdown of a relationship than men, as the Insolvency Service found several years ago when it looked into the reasons why people became bankrupt. Being a single parent also correlates strongly with financial hardship, and women make up the great majority of single parents.”
“This April marked the tenth anniversary of the introduction of Debt Relief Orders. Designed to be used by people with lower asset levels, smaller debts, and a low level of disposable income, the DRO has established itself over the past decade as a useful debt forgiveness tool for people who don’t have enough income to agree an Individual Voluntary Arrangement, and for those who can’t afford the £680 to become bankrupt, or whose lower levels of assets would make a bankruptcy less viable.”
“The introduction of DROs is a major reason why women reversed the ‘gender gap’ in insolvencies: DROs are more common than bankruptcies – albeit far less well-known – and the gender split of people entering DROs is heavily weighted towards women. This links back to the generally more precarious state of women’s finances, as they are used for smaller debt and asset levels than other personal insolvency procedures.
“Bankruptcy was once again the procedure which was used by more men than women. It’s often linked to the closing or insolvency of a business where directors – who are more likely to be men than women – have given personal guarantees to lenders for business debts, are reliant on their income as a director, or where an individual is a sole trader liable for their business debts.”
“The gender split in IVAs is broadly the same as last year. IVAs are typically used to handle consumer debts such as credit card debt, and their take-up is partly driven by marketing, and how aware people are of them as an option.”
“There’s no doubt that wider structural inequalities within society have an impact on the gender split within insolvency, but it’s important to remember that, for many people who become insolvent, the process offers the opportunity for a fresh start, financially speaking. Given the many overlapping and interlocking ways that women are generally more disadvantaged from an economic point of view, we are unlikely to see gender balance in personal insolvency rates any time soon.”
“The areas with the highest levels of personal insolvency are largely unchanged from last year. A higher personal insolvency rate is a symptom of wider deprivation, and highlights the need for debt advice services to be targeted and tailored for people living in less affluent areas.”
“The historical retreat of the industrial sector caused decades of hardship in many places, as well-paying jobs disappeared which were replaced, at best, by more precarious and worse-paid employment.”
“Coastal areas often have higher rates of personal insolvency than inland areas. As places which often depend on an influx of tourists in the summer months for income, they are dependent on the consumer pound, which has been in shorter supply of late. The seasonal nature of tourism-related work makes it hard for many residents to build up savings to last them in leaner times, leaving them vulnerable to the type of economic shock that can often trigger insolvency.”
“Although the rate of growth of consumer debt has slowed, the amount owed by individuals is still rising, while inflation-adjusted employees’ earnings are still lower than before the 2008-2009 recession, according to the ONS. Ensuring that people in problem debt are aware of their options, and that they can access a suitable form of personal insolvency if that is the best option for them, should be a priority for the Government.”
The results also showed:
Local Authority – highest rates of insolvency
| Local Authority | Insolvencies per 10,000 adults |
| Stoke-on-Trent | 51.9 |
| Scarborough | 47.8 |
| Torbay | 45.7 |
| Plymouth | 45.2 |
| Kingston upon Hull (City of) | 44.9 |
| Blackpool | 43.8 |
| Corby | 42.1 |
| Burnley | 40.4 |
| Barnsley | 39.9 |
| Stockton-on-Tees | 39.8 |
Source: The Insolvency Service
Local Authority – lowest rates of insolvency
| Local Authority | Insolvencies per 10,000 adults |
| Kensington and Chelsea | 9.9 |
| Mole Valley | 9.9 |
| Camden | 10.0 |
| Westminster | 10.2 |
| Wandsworth | 10.5 |
| Harrow | 11.3 |
| Richmond upon Thames | 11.6 |
| Epsom and Ewell | 11.7 |
| Brent | 12.2 |
| St Albans | 12.4 |
Bai Cham, Partner at CVR Global, believes major financial surgery is needed on the coast “Individual insolvencies can happen for all sorts of reasons – such as relationship breakdowns, illness or lack of money management – but the rates of insolvency often paint a picture of the health of local economies – and tourism is one of those sectors that can often suffer.”
“In turn regions that rely on tourism can be the hardest hit – when the sun is shining business is booming – but what happens in these locations during the other half of the year? Devon and Cornwall – two of the UK’s most desirable holiday destinations and with a rich farming community – had just shy of 30 people per 10,000 adults entering into insolvency.”
“This is the second highest rate behind the North East and is brought about by an economy that suffers during off-peak seasons, coupled with a lack of investment driven by Brexit uncertainty. The demise of coastal towns is rife though and has been ever since the rise of overseas package holidays – this is a problem that has been a long time coming for tourism businesses on our coastlines, and this is filtering down into consumer insolvencies as seen in this report.”
“Attracting inward investment into towns and cities is of course easier said than done, but it is exactly what is required in order to restore coastal economies – and communities – back to the booming age of the mid-to-late 20th century. Margate is a success story where investment in a major attraction has allowed other businesses to flourish. The town was typical of many seaside resorts throughout the UK and had suffered from a lack of investment for many years, but since the opening of Turner Contemporary art gallery, there is a new optimism that the town can re-establish itself and thrive once more.”
“Off the back of this report there will be a lot of concerned businesses in coastal areas worried about becoming another insolvency statistic, and I would recommend they seek advice from an insolvency expert now. If there is any doubt in your mind about your business’s long-term viability then an insolvency practitioner can help you to plan ahead – they aren’t just there to clean up financial turmoil, they are also there to prevent it.”
