Adults in the region facing a gap in their personal finances are most likely to plug it by cutting their spending, according to new research by insolvency trade body R3
R3/ComRes’ regular Personal Debt Snapshot found that more than half (56%) of the people they surveyed in the North East, Yorkshire and Humberside would resort to spending less if they experienced an interruption to their regular finances, while 48% would use personal savings.
More concerningly, significant numbers reported that they would rely on credit or take on more debt to address their money problems, with a third (33%) of those surveyed saying they would turn to credit cards to provide a solution, over one in five (21%) looking for a bank overdraft, 5% not paying other debts and 4% applying for a payday loan.
Three in ten people (30%) reported that they would turn to friends or family for a gift or loan to help them through.
R3’s latest research suggests that, across the UK, 2.86m people have borrowed over £100 from family or friends in the last month.
The survey also found that 46% of people in the region often or sometimes struggle to make it to payday, a figure which is seven percentage points higher than the national average.
Neil Harrold, chair of R3 in the North East and a partner with Hay & Kilner Solicitors, says: “It’s all too easy for people to get into serious financial trouble as a result of an unanticipated blip in their personal finances, and for those trying to plug a gap, spending less is one way to avoid storing up problems for the future.
“Using personal savings is also a healthy way of plugging a gap, but it’s not an option available to everyone, and with a considerable portion of people in the region already struggling to payday, any interruption to income can be critical.”
According to the latest annual figures from The Insolvency Service, there were 22.6 individual insolvencies per 10,000 people in the North East in 2015, which is the highest rate of any part of the UK.
Every local authority area across the North East had a rate of at least 20 individual insolvencies per 10,000 residents, with Hartlepool Borough Council falling into the highest category of having an insolvency rate per 10,000 residents of more than 25.
Neil Harrold adds: “Falling behind on other bills or relying on payday loans are short-term solutions which in-turn can make the gap all the bigger.
“It’s too easy for financially-vulnerable people to get caught in debt traps where one debt sparks another and a dangerous cycle emerges which is difficult to break without help.
“The best thing for anyone who thinks they’re heading into choppy financial waters is to take steps to address their problems sooner rather than later. There are many different options available to help people solve their money troubles, but the longer they’re left unchecked, the harder it is likely to be to address them.”