The North East has the country’s highest rate of bankruptcies and IVAs.

The Insolvency Service has released regional insolvency figures showing that Bankruptcies, Individual Voluntary Arrangements and Debt Relief Orders have shot up nationwide within the last 8 years.

Total rate of insolvencies leapt from 7.2 per 10,000 people in 2000 to 30.9 in 2009, a four-fold increase, before falling back to 24.5 in 2012.

Worryingly for the North East, it has been the region with the highest rate of bankruptcies and IVAs every year, for the past 5 years.

By the end of 2012, 0.33% of the region entered into bankruptcy, IVA or a debt relief order, which was 35 per cent higher than the average for the rest of the country.

Below is a graph showing the growth in personal insolvency in the country as compared to the North East.

Table 1. Rates of personal insolvency (per 10,000 people). The North East vs England & Wales

personalinsolvencychart

The story within the North East…

In 2012, the highest level of insolvency within the region was in Gateshead with 36.5 in every 10,000, followed by 36.3 in Sunderland and Northumberland.

On the other end of the scale, if you lived in Stockton in 2012 you were 72% less likely to go through a personal insolvency than those in Gateshead. Hartlepool’s figures were more akin to those in the region’s north, whilst Newcastle’s rate of 33.8, was much higher than Redcar’s rate of 25.6.

Table of North East insolvency rates in 2012 (rates are per 10,000 people):-

PIR2012chart

It seems evident from the figures that in terms of the chances of entering bankruptcy or an Individual voluntary arrangement, there is a North South divide within the region. Most surprisingly, Tyne and Wear and Northumberland suffer with a much higher rate than Teesside.

In fact, the rate of insolvency around Teesside is pretty much in line with the National average, and in some regions below, whilst it is the northern regions of the North East that have such alarming figures.

There is no obvious reason as to the divide, and it’s even more surprising taking into account the unemployment data over the last 5 years, which shows Teesside suffering significantly more in this area than Newcastle.

One idea to consider is regarding what happened in the lead up to the recession. Newcastle and its surrounding areas had a wealth creating boom much more significant than Teesside’s. The popping of any economic bubble will usually create a corresponding spike in personal insolvencies, and that may be the case here. If so, we would expect to see the level of personal insolvencies align between the regions over the next couple of years

It’s not all doom and gloom for the North East

There has been a real lift in the regions’ business communities and their outlook. If this continues, we would hope it will translate in higher employment rates, better paid jobs, and a long but very real improvement in the region’s economies.

Personal insolvency rates have fallen across the region over the last 3 years, and although they are still at too high a level, the direction is the right one, and there is a feeling that we have already turned the corner.

For personal insolvency advice or information on this article, please contact me on the above number or email ewall@robsonscott.co.uk
Eamonn Wall
Managing Director,
Robson Scott