Official figures released this week by the Insolvency Service has shown that personal insolvencies have continued to fall across England and Wales from the peak five years ago, but those that live in coastal areas are still the most likely to be struggling.
In general the figures show that there has been a drop from 30.9 personal insolvencies per 10,000 individuals in 2009 to 22.4 in 2013. However 60% of the top towns/cities with the highest insolvency rates are still situated beside the sea.
Topping the list nationally are Torbay, Rhyl, Blackpool and Scarborough. Continuing on a trend that has been prevalent for several years now, the North East is still occupies the highest rate of personal insolvencies for any region, 30.9 per 10,000 individuals. Surprisingly despite the already high, and rising cost of living, London remains the region with the lowest percentage standing at 13.9.
With the causality most likely due to the seasonal nature of coastal resorts and their associated labour markets, the North East is believed to be suffering from the decline of its traditional heavy industries and boasts the highest unemployment rate in the country, potentially explaining why it’s personal insolvency hotspot.
Although the research suggests that personal insolvencies as a whole are in decline, the figures also reveal that the numbers of individual voluntary arrangements (IVA) are continuing to increase since their introduction. Possibly because many individuals see an IVA as an alternative to bankruptcy and so this might explain their increased popularity.
IVAs let individuals agree to pay a percentage of their debts back over an arranged period, or restructure debts into a longer time frame and do not carry the strict consequences of bankruptcy.
In regards to bankruptcy rates the research shows there has been a general decline, falling to 5.4 per 10,000 in 2013 across England and Wales, down from 7.1 in 2012. Topping the bankruptcy chart was Blackpool with a rate of 11.2 whilst Cambridge had the lowest percentile of 2.1.
The big question remains to be seen though regarding personal insolvencies, with the markets for unregulated debt management plans (DMP) still not accounted for in any official statistics, levels of real personal insolvencies may be higher than the trend suggests.
As DMPs can be provided by unregulated sources some may be actually making individuals worse off long term as they fall prey to confusing contracts and sections that may hinder long term recovery; such as rolling the arrangement over every month, meaning the debtor may not be paying back much to creditors after high interest rates and front loaded fees.
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