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13/07/2018

Women and seaside towns again see most personal insolvencies – R3 comments on 2017 statistics

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 this morning 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.

Gender

  • 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, comments:

“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.

Regional

Mark comments: “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 AuthorityInsolvencies per 10,000 adults
Stoke-on-Trent44.8
Plymouth40.4
Hull39.5
Scarborough38.5
Blackpool38.1
Corby37.4
Isle of Wight37.4
Torbay37.1
Gloucester36.4
Harlow34.3

FURTHER INFORMATION

What causes insolvency among men and women?

R3 published a report in June 2016 on the different causes of men’s and women’s insolvencies. The report can be found here and a summary is here.

In 2016, the government also published statistics on the 17 causes of bankruptcy in 2015 as categorised by the Insolvency Service and broken down by gender. The statistics showed that:

  • 34% of men’s bankruptcies in 2015 were caused by the bankrupt’s own company running into financial problems, compared to 13% of women’s bankruptcies (26% for all adults).
  • The most common single cause of men’s bankruptcies in 2015 was ‘living beyond means’ (approx. 995 bankruptcies), closely followed by ‘management failure’ at their own company (990), and the bankrupt’s loss of their job (920).
  • The most common single cause of women’s bankruptcies in 2015 was ‘living beyond means’ (1,110), ‘relationship breakdown’ (1,075), and the loss of or a significant reduction in household income (750).

Different types of insolvency

Bankruptcy: During a bankruptcy your assets are placed under the control of a trustee who will use them to raise money to repay creditors. You are bankrupt for a year (during which you are subject to some restrictions, such as not being able to be director of a company), although your assets may stay under the trustee’s control after that. A creditor may petition the court to have you made bankrupt if you owe them at least £5,000, or you can apply to be made bankrupt yourself (which costs £680 in up-front government and court fees for online applications). With some exceptions, your debts are ‘cancelled’ at the end of the process.

Individual Voluntary Arrangements: A statutory agreement between you and your creditors to repay a certain portion of your debts over a certain period of time. You retain control of your assets and the agreement is overseen by an independent supervisor. You usually have to have some surplus income left over after your living costs every month from which to make payments.

Debt Relief Orders: You may enter a DRO if you have under £1,000 of assets and under £20,000 of debts. Your assets are not used to repay creditors and your debts are ‘cancelled’ at the end of the process. Like bankruptcy, you subject to some restrictions for a 12 month period.

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see www.r3.org.uk for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.