Insolvency rate in ‘Red Wall’ constituencies 27% higher than UK average

Publications that covered this story include: The Times
  • Higher insolvency rate highlights north/south economic divide in UK

The average insolvency rate amongst individuals in ‘Red Wall’ constituencies is 27% higher than the UK average, our research shows.

‘Red Wall’ constituencies are areas in the midlands and northern England which have historically supported the Labour Party but voted for the Conservatives in the 2019 General Election.

The average insolvency rate in ‘Red Wall’ constituencies was 31.7 per 10,000 adults in 2018, compared to the UK average of 25 per 10,000*. The average insolvency rate in these areas has been higher than the UK average for each of the last five years (see graph).

Our research shows that the high insolvency rates in these constituencies highlights the extent of the north/south economic divide in the UK.

Many northern areas have higher unemployment than in the south which contributes to above average insolvency rates. ONS data shows the average unemployment rate for northern areas is 4.6% compared to just 3.4% in the south**.

These ‘Red Wall’ constituencies have also struggled to replace traditional industries, such as manufacturing, with faster growth ones, such as financial services and technology.

Slower growth in public spending on northern areas may have contributed to the north/south economic divide. Public spending on southern areas increased 30% over the last decade, rising from £252bn in 2008/09, up from £329bn in 2018/19, while spending on northern areas increased 23% over the same period, from £239bn to £295bn***.

These figures come as the newly elected Conservative government has promised to increase investment in the north to help drive growth and encourage foreign investment.

Peter Kubik, Turnaround and Recovery Partner in our London office, says: “These figures expose the gulf of the north/south divide in the UK.

“Personal insolvencies are often caused by a shock to income such as sudden redundancy. Regions with higher unemployment and underperforming local economies are therefore likely to have higher insolvency rates.

“There are clearly substantial structural imbalances in the UK economy which need to be addressed. Increased funding from the Government for northern areas may be all important to tackle the problem.”

The average insolvency rate in ‘Red Wall’ constituencies has been higher than the UK average for each of the last five years

*Source: Insolvency Service
** Northern areas include: North East, North West, Yorkshire and the Humber, East Midlands and West Midlands. Southern areas include: London, South East, South West and the East of England
***Source: ONS