Glasgow and Edinburgh may have some of the highest numbers of insolvencies in terms of pure numbers, but it’s people living in rural communities, ‘fringe’ areas and Dundee who face the biggest risk of bankruptcy.
The Accountant in Bankruptcy’s (AiB) latest report shows that a total of 4,644 people were declared bankrupt in 2017/18.
That figure represents an increase of 1.8% on the previous year, although the number remains significantly down on the figures post market crash.
73% of bankruptcy applications in Scotland were made by the individual. The remainder were applications by creditors and just 4 (a number so small it barely registers on the below chart) were trust deed petitions – occurring, for example, when an individual breached the terms of a Scottish Trust Deed.
Bankruptcies in Scotland
On the face of it, the AiB’s figures don’t hold many surprises. Of the five areas with the highest numbers of bankruptcies, three are major cities: Glasgow, Edinburgh and Dundee. Of course they are – those three cities account for more people than the rest of the top 10 most insolvent areas combined.
And yet, dig a little deeper, and all is not as it first appears. For starters, if population and insolvency went hand in glove, then surely Glasgow with a population more than 100,000 in excess of its nearest rival (Edinburgh) would be first. Aberdeen, Scotland’s third most populous city, would surely feature somewhere in the top 5. In reality, it barely makes the top 10.
The Fife conundrum
Sandwiched between Edinburgh, Dundee, Stirling and Perth, virtually everyone in the Fife region is within an hour’s drive of a major conurbation. According to the Fife Economy Partnership’s latest data, the employment rate, although falling slightly, is considerably better than the Scottish and UK average. So why does Fife, in pure numbers terms, have such a high level of insolvency?
Earlier this year, Scottish Business Minister Jamie Hepburn told The Scotsman, “The ongoing uncertainty around EU exit, alongside the challenges of the roll out of Universal Credit, bear much of the blame.”
That seems unlikely as this isn’t a new issue. Back in 2011, a time before either Brexit or Universal Credit, The Herald reported that Kirkcaldy, Dunfermline and Glenrothes held three of the four top spots as the most insolvent towns in Britain. Perhaps even more alarmingly, the actual insolvency rates had improved considerably from the year before, when Glenrothes rate was 29% higher.
And when you look at percentages compared with populations, the latest AiB figures show that, despite the high numbers, insolvencies in Fife are merely mid-table.
An Insolvency Map Of Scotland
The above table tells a story in three parts. The first is about the Fifes, West Dumbartonshires and West Lothians. These and other areas on the fringes of major cities seem to be victims of geography, with buoyant economies when you factor in the earnings of those who live in the area but don’t work in it. Yet strip out the wages of those commuting to Glasgow, Edinburgh, Aberdeen etc and the picture is far less secure, as this report into Fife’s economy demonstrates.
The second part of the story is rural Scotland. North Ayrshire, Angus, Moray and Highland all have insolvency rates almost twice those of Edinburgh, highlighting the economic inequality between urban and rural. In 2018, the Scottish Government’s report ‘Understanding the Scottish rural economy’ noted the close integration between urban and rural economies, but also noted that there remain “distinct differences, often related to distance and scarcity.”
But perhaps the biggest surprise is the story of Scotland’s dominant cities. In terms of individual applications, Glasgow, Edinburgh and Aberdeen all feature in the top five. Proportionally, however, Aberdeen only squeaks into 10th place. Glasgow is 22nd and Edinburgh 24th (out of 32). But Dundee is first.
Hope for Dundee
You are more than four times as likely to be insolvent if you live in Dundee than you are in Inverclyde. Those claiming Universal Credit and Job Seekers Allowance in Dundee remain well above the Scottish average, but the figures are falling and, slowly yet crucially, starting to catch up with the rest of the country. And the pace of improvement could be set to quicken.
The V&A’s new museum on Dundee’s waterfront has proved controversial with many who point to areas of multiple deprivation in the city. They suggest there are better ways of investing £70 million. And yet, as David Martin, chief executive of Dundee City Council told the FT, the benefits stretch beyond Dundee’s art lovers. “There are 14 sites around here with commercial interest in them. Ten years ago we were struggling to get anyone interested in anything that didn’t involve the council underwriting the risk,” he said.
Dundee may be Scotland’s insolvency hotspot today, but don’t expect that position to stay static.
Alternatives To Bankruptcy
Bankruptcy (or sequestration) is sometimes the only realistic option for Scots struggling with debt. But for far more people, there are alternatives.
“Bankruptcy can feel like the nuclear option,” David Baddeley from Scottishtrustdeed.co.uk commented, “and alternatives such as a protected trust deed can help individuals out of debt with fewer restrictions – and often with far less stigma – than sequestration.”
The AiB report shows that the number of protected trust deeds was significantly higher than bankruptcies last year (5,948 vs 4644), but there are clear regional differences. Dundee had the highest proportion of bankruptcies but was only 16th for trust deeds, suggesting far less awareness of the potential of a trust deed here than in, for example, Glasgow.
“It’s often only when you start investigating your options in detail that you see just how many choices you have for getting help with your debt in Scotland,” explained David Baddeley. “As the AiB’s data demonstrates there’s a big difference in the way Scots in different parts of the country are dealing with their debt. I suspect that is less a matter of choice, and more a case of some Scots getting better access to debt help than others.”
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