Personal insolvencies more common among women, in the North East or by the sea – R3 comments on 2018 statistics

17 July 2019

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 this morning by the Insolvency Service.

Looking at the geographical spread in the statistics, the North East and coastal towns such as Torbay and Blackpool typically had the highest concentrations of personal insolvencies, also following the pattern established in recent years. 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.

Gender

• 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.
• 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 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, comments:

"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."

Regional

Mark Sands comments:

"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."

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

Source: The Insolvency Service

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.

 

"Individual Insolvencies by location, age and gender, England and Wales 2018" - The Insolvency Service, 17 July 2019 (https://www.gov.uk/government/statistics/individual-insolvencies-by-location-age-and-gender-england-and-wales-2018)

"£2.3 billion debt relief granted in 10 years of DROs" - The Insolvency Service, 6 April 2019 (https://www.gov.uk/government/news/23-billion-debt-relief-granted-in-10-years-of-dros)

"Employees' earnings are still lower than before the 2008-2009 recession, after taking inflation into account" - ONS, 16 July 2019 (https://twitter.com/ONS/status/1151048349505728512)