Insolvencies among young women rise 24 per cent in a year

Almost 40 per cent of women struggle to get to the end of the month

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Insolvencies among young women are growing faster than in any other demographic group, according to official data that shows they are struggling the most with their finances.

The number of insolvencies among women aged 18 to 24 jumped almost a quarter last year, rising to 3,930 in 2018 from 3,175 in 2017, analysis of data from the Office for National Statistics (ONS) by accountancy group UHY Hacker Young shows.

Younger adults, typically lower on the salary ladder and often trying to pay off education and training debts or cover the costs of having young families, face notorious cash-flow problems.

UHY Hacker Young adds that some young people may also be struggling to control the amount of debt they are taking on from relatively new forms of “point of sale” credit, as online retailers offer easy to obtain credit via providers like Klarna.

But the financial pressure seems skewed as insolvencies among young men are only up 15 per cent over the year to a total of just 2,843 people.

Big picture

All individual insolvencies increased at a slower 17 per cent in 2018, the latest data available, with 116,407 people officially identified as being unable to pay the money they owe.

In fact, as a nation, we may be starting to curb the increases in debt. While Christmas took our credit card spending alone to £11.84bn, the 2.4 per cent rise was down from 4.3 per cent the previous year, for example.

And while overdraft borrowing is also up at £6.65bn at Christmas, that’s less than it was the previous year.

But more of us are struggling to pay our debts off. The value of consumer loans written off by UK banks because their customers couldn’t meet the repayments hit £456m in 2018-19, the highest level since 2014-15.

Personal insolvencies are normally caused by a combination of both a shock to income, such as unemployment, and the build-up of excessive debts.

Hit hardest

Among young women, UHY Hacker Young says the rise in insolvencies could be driven by growing redundancies in particularly hard-hit sectors, with some large restaurant and retail chains cycling through rounds of redundancies in recent years.

ONS data shows 66 per cent of jobs in the retail and hospitality industries are held by women, compared to just 34 per cent held by men.

“If pressure on the high street continues then women are likely to continue to bear the lion’s share of the financial pain from that,” says Peter Kubik, partner at UHY Hacker Young.

“Each new generation of consumers needs to avoid falling for attractions of easy credit. Ten years ago, it was credit cards and sub-prime mortgages. This time around the new risks are point of sale credit, payroll lending and auto-loans.”

In fact, figures from the Young Women’s Trust show that the debt problem is much more widespread than the official numbers present.

Always in debt

Almost 40 per cent of young women struggle to make their cash last until the end of the month and a third of young mums, for example, say they are always in debt, the charity has warned.

Many of those surveyed said they live in daily dread of debts such as unsecured loans including credit cards, personal loans, store cards and overdrafts. One in three said they did not expect to be free of personal debt until they reach 40.

“Young women across the UK are pushed into doing jobs that society values and pays less; they are pushed into providing low-paid and unpaid care work; they are forced into dependency on a dysfunctional welfare system, then branded as feckless and left to fend for themselves. This has to change,” Sophie Walker, Chief Executive of Young Women’s Trust, said.

The survey also found clear links between young women’s experience of debt and pay inequality, unaffordable childcare, a complex benefit system and sexism.

No let up

There are not many expecting their circumstances to significantly improve this year.

Almost 10 million working adults across the age and gender demographics are expecting their wages to stagnate this year as signs of a fresh squeeze on household finances begin to emerge, new figures from investments organisation Scottish Friendly suggest.

Nearly one in three workers believe their employer will put a freeze on pay this year just as official data shows the UK economy slipped back in November.

A further 30 per cent believe their pay will rise by less than 2 per cent in 2020. With annual inflation currently running at 1.3 per cent, it means millions of workers could experience a pay cut in real terms in 2020.

If households’ fears become reality, it could result in inflation outstripping wages for the first time since February 2018.