Times are getting hard

Jun 20 2008 by Nicholas Craig, The Journal

BANKRUPTCIES in the North East have soared to seven times the national average this year.

Sunderland saw more people going bust than any other part of the region, but Newcastle followed hard on its heels with a 31% increase from the previous three months.

It is personal bankruptcies rather than business ones which are zooming up. More than half of all personal bankrupts are in their 20s. Credit card debt is going through the roof.

This region has always had a work hard, play hard reputation, with people spending rather than saving. Fifty years ago there was also a culture of paying for what you bought there and then, when you could afford it, rather than opting for hire purchase.

How times change. Young people are now offered credit wherever they turn. The expense of student fees, loans, living independently, furniture, clothes, travel and cars mounts up frighteningly. Many under-30s borrow more money to cover repayments of loans, and that leads to a spiralling debt trap.

What is even more surprising is the shocking rise in serious debt affecting retired and elderly people. Apparently GPs are reporting that more elderly patients are coming to discuss non-medical problems such as debt.

Older borrowers are being squeezed at both ends – by children who are financially dependent well into adulthood and by their parents who are living longer and needing care. ‘Never a borrower nor lender be’ may be a fine sentiment, but in reality only the very rich can avoid the need to borrow, whether to buy a home, a car or just to cover the minutiae of daily life.

With interest rates and inflation rising, the over-riding concern is that the credit crunch will lead to higher unemployment in the North East. The spectre of job losses looms closer and the prospect of more personal bankruptcies is a depressing, but increasingly inevitable consequence.

We will have to let a little go a long way until the crunch eases. Let’s hope the economic climate brightens before job opportunities shrink.

Nicholas Craig is a partner at Watson Burton LLP