Gender gap persists, cost of living rises: A review of personal insolvency statistics 2021

15 August 2022

Data from the Insolvency Service published in April shows that personal insolvency levels fell for the second consecutive year in 2021, contrary to what many might have expected with the country still dealing with the impact of the COVID-19 pandemic.

While we saw personal insolvency levels trending downwards in 2021, this annual release from the Insolvency Service, which breaks down individual insolvencies in England and Wales by location, age and gender, provides more detailed insight into how different people across England and Wales are affected by financial distress.

IVAs on the rise

Individual voluntary arrangements (IVAs) continued to account for the majority (74%) of individual insolvencies in England and Wales and were 0.6 per 10,000 adults higher than last year. It was also the only type of personal insolvency procedure to increase (by 2.9 per 10,000 adults) over the five-year average rate.

Bankruptcies have been trending downwards, and in 2021 the rate of bankruptcies was 1.8 per 10,000 adults in England and Wales, which is lower than in 2020 by 0.9 per 10,000 adults.

Meanwhile the rate of debt relief orders (DROs) was 4.3 per 10,000 adults in England and Wales, which is the same as it was in 2020 but 1.2 lower than the five-year average rate. However, DRO numbers were higher in the second half of 2021, following changes to DRO eligibility that came into effect on 29th June 2021, which has led to a greater number of people being able to deal with their financial difficulties through this procedure.

The gender gap widens

For the eighth successive year, the insolvency rate for women (25.0 per 10,000 adults) was higher than for men (21.5 per 10,000 adults). This represents a gender gap of 3.5 per 10,000 adults, which is 1.1 higher than in 2020.

Historically, men have had a higher rate of insolvency than women, but from 2009 this gender gap began to narrow and by 2014, this situation began to reverse. This change coincided with a decline in the number of bankruptcies, the introduction of and growth in the number of DROs (where the rate for women has been higher), and the narrowing and subsequent reversal of the gender gap for IVAs.

IVAs accounted for the highest proportion of insolvencies for both men (76%) and women (73%), while DROs accounted for 21% of insolvencies among women and 14% among men. The picture was reversed for bankruptcies, where 6% of insolvencies among women were bankruptcies while 10% of insolvencies among men were bankruptcies.

Regionally, women had higher insolvency rates than men across England and Wales, with the largest gender gap in the North East (a difference of 5.6 insolvencies per 10,000 adults). Overall, the gender gap was larger in the northern regions of England and in Wales than in the south of England.

Regional divides

The North East continued to have the highest rate of insolvency in 2021, with 28.7 insolvencies per 10,000 adults. It has been the region with the highest rate of insolvency each year since 2008.

Meanwhile, the South West had the highest rate of bankruptcy (2.2) for the third year in a row and London had the lowest rate of DROs (2.2) and IVAs (12.6), but for the first time since the series began, the West Midlands had the lowest rate of bankruptcies (1.5).

All other regions had similar overall insolvency rates, ranging from 22.0 in the South East to 26.5 in the North West.

Cost of living pressure

The lower rate of personal insolvencies in 2021 compared to 2019 and 2020 is likely to be partly driven by enhanced government financial support measures put in place to support individuals during the COVID-19 pandemic, as well as increased forbearance from creditors towards those that they have lent money to.

However with all temporary support measures coming to an end earlier this year, coupled with the rise in fuel and energy costs, a hike in National Insurance and the inflation predicted to reach 13% or more by October, many people across England and Wales are concerned about their personal finances.

A study by University College of London into people’s attitudes and behaviours throughout the pandemic and beyond shows that compared to six months ago, fewer people feel in control of their finances (currently 56% vs 63% in October 2021). Although we hope to see personal insolvency levels continue to fall, we may see these financial concerns reflected in next year’s data.

Understanding the signs

We understand that talking about money worries can be incredibly challenging. That’s why it’s so important to be able to recognise the first signs of financial distress. Seeking qualified advice at the earliest opportunity ensures the most options are available to resolve the situation, and the more time available to make a decision about how to move forward.

R3 has produced a free guide that outlines the full range of personal insolvency options for people in financial distress. To download a copy, click here.