The Insolvency Service has recently published statistics of individual insolvencies by location, age and gender for England & Wales showing trends from 2000 to 2017. Nationally, the figures show that bankruptcies per 10,000 of the adult population have fallen each year since the recession of around 10 years ago but that decline has stalled with 2016 and 2017 both seeing 3.3 per 10,000 adults going bankrupt.
However, the regional statistics make more grim reading for the South West, which had the second highest total bankruptcies per region in 2017, with 3.9 per 10,000 adults becoming bankrupt, being an increase on the previous year and above the national average.
The picture of new bankruptcies becomes even more concerning for the South West region when looking closer at local authority districts:
The table shows that three of the four highest bankruptcy rate districts in England and Wales are in Devon, with the mostly rural West Devon (from Yelverton up to Hatherleigh) topping the table at around double the national average. There were 30 new bankruptcy cases in 2017 in that sparsely-populated district of around 45,500 people equating to 6.6 per 10,000 of the adult population. West Devon even beats Torbay, formerly known as the bankruptcy capital of the country, and is in stark contrast to the district of Chiltern (in Buckinghamshire) with a population of around 75,000 and ‘only’ 12 new bankruptcies. Also, contrast the city of Plymouth which saw more than twice as many bankruptcies as the cities of Oxford and Cambridge combined.
Personal insolvency rates as a whole for the region are higher than the national average. Personal insolvency includes individual voluntary arrangements (IVAs) and Debt Relief Orders (DROs) as well as bankruptcies. In 2017, the insolvency rate in England and Wales was 21.4 insolvencies per 10,000 adults, an increase from 19.7 the previous year. However, the rate for the South West was 24.8, in comparison to London which has the lowest rate of 14.1.
The local authority districts of Plymouth and Torbay show very high levels of insolvency, around twice the national average, at 40.4 and 37.1 per 10,000 adults respectively, with a combined 1,258 new insolvencies in 2017. This is contrast to some London boroughs with nine per 10,000 adults entering formal insolvency.
So, why is the South West showing higher insolvency rates than most other regions of the country, even this long after the recession? According to a 2014 interview with charity, Debt Support Trust, more tourist-oriented regions can feel the effects of a recession for longer because they are reliant on the spending habits of those outside the region. This, in particular, could be affecting Torbay. On top of that, the more seaside towns and rural areas do not feel the effects of rejuvenation as rapidly as more urban areas – everything progresses slower.
Even though the weakened pound has meant that more holidaymakers may have stayed in the UK rather than go abroad, the region as a whole has been struggling to recover from decades of decline in coastal industries with seasonal tourism being hit by ever cheaper flights and package holidays. The combined result of fewer visitors and lower incomes means that employment has declined, with many jobs being only seasonal and/or low-paid, leading to a downward cycle of debt. Stuart Carmichael, of the Debt Support Trust said that “It takes about seven years after someone has lost their job for them to reach breaking point – it is a long cycle in which the debt slowly builds up.”
According to Jeremy Willmont, Head of Moore Stephens UK Restructuring, “Personal debt in many British seaside towns shows no sign of improving” and that “people living in these towns continue to fall into insolvency as the coastal economy fails to keep up with the rest of the country”. Therefore, local people in these situations could be left with little or no spare cash to cover essential living expenses and end up taking out new loans or credit cards to keep existing lenders at bay eventually becoming trapped in a relentless cycle of debt. Therefore, for many, the inevitable result is bankruptcy or another form of insolvency. Furthermore, as the economy along the coast declines, unemployment could worsen and, as Jeremy Willmont points out, “this may result in many more highly educated millennials relocating to larger cities, deterring new employers from relocating to the area”.
If you or your business need any advice on any of the above or cash flow problems, please call the PKF Francis Clark Business Recovery team who can help on 01392 667000 to arrange a free, no obligation, initial meeting.