Debt Management (Commercial and Consumer)

Debt Management (Commercial and Consumer)

As at the end of 2007, the total amount of UK bank and building society lending outstanding to individuals and businesses was £2,106.7bn, a rise of 12.8% on 2006 and 53.8% higher than the figure recorded in 2003. After a number of years of low interest rates and sustained economic growth, borrowing levels in parts of the household and corporate sectors have increased significantly.

This Key Note Market Report covers lending to: individuals, including consumer credit and loans secured on dwellings; and corporate bodies, including other financial corporations, non-financial corporations, unincorporated businesses and non-profit-making organisations. In 2007, the largest sector was loans secured on dwellings. The fastest-growing sectors between 2003 and 2007 were loans made to other financial corporations and loans to non-financial corporations.

The global credit crisis has had a significant impact on the UK credit and debt management market. In 2007/2008, tighter bank credit restrictions and rising mortgage interest rates have contributed to falling house prices and an increase in house repossessions. Simultaneously, rising inflation — caused, in part, by higher food and energy prices — has affected the finances of many households, and has led to increases in the numbers of households seeking debt-management advice.

A new set of standards to help people resolve their debt difficulties through individual voluntary arrangements (IVAs) came into force in February 2008. The new standards aim to establish a streamlined process for consumers seeking IVAs, and also set out the principles that will apply to creditors and IVA providers. The IVA industry experienced a difficult year in 2007 owing to a variety of factors, including: falls in the number of IVAs registered; increased competition; creditor reluctance to accept IVAs; and consumer unease caused by adverse press coverage. It is hoped that the new standards will restore confidence in this form of debt management and that the number of IVAs registered in 2008 will rise significantly.

Tighter lending conditions by banks, as well as increases in the cost of borrowing, are expected to affect bank and building society lending in 2008. Despite this, the level of outstanding debt is forecast to rise further in 2008, although the annual percentage rate of increase is projected to be lower than in 2007. With the numbers of house repossessions forecast to rise sharply in 2008, and with further increases forecast in the number of individual insolvencies, demand for the services of the debt-management companies looks likely to remain strong.  
 

Executive Summary

1. Market Definition

REPORT COVERAGE

Consumer Credit Services

Commercial Credit Services

MARKET SECTORS

Lending to Individuals

Loans Secured on Dwellings

Consumer Credit

Other Lending

Loans to Other Financial Institutions

Loans to Non-Financial Corporations

Loans to Unincorporated Businesses and Non-Profit-Making Bodies

MARKET TRENDS

Easy Credit Conditions are Unlikely to Reappear

Market Conditions Vary for Debt-Management Companies

Amount of Borrowing Outstanding in the UK Continues to Rise

Mortgage Repossessions are Increasing

Individual Voluntary Arrangements Fall in 2007

ECONOMIC TRENDS

Population

Table 1: UK Resident Population Estimates by Sex (000), Mid-Years 2003-2007

Gross Domestic Product

Table 2: UK Gross Domestic Product at Current and Annual Chain-Linked Prices (£m), 2003-2007

Inflation

Table 3: UK Rate of Inflation (%), 2003-2007

Unemployment

Table 4: Actual Number of Unemployed Persons in the UK (million), 2003-2007

Household Disposable Income

Table 5: UK Household Disposable Income Per Capita (£), 2003-2007

MARKET POSITION

The UK

Table 6: Consumer Credit Gross Lending by Lender (£m), 2003-2007

Table 7: Consumer Credit Gross Lending by Type, (£m) 2003-2007

Table 8: Total Amounts of Lending Outstanding to Individuals and Businesses at Year End (%), 2003-2007

Overseas

2. Market Size

THE TOTAL MARKET

Table 9: Total Amount of UK Bank and Building Society Lending Outstanding at Year End by Type of Borrower (£m), 2003-2007

Figure 1: Total Amount of UK Bank and Building Society Lending Outstanding at Year End by Type of Borrower (£m) 2003-2007

Table 10: Total Amount of UK Bank and Building Society Lending Outstanding to Individuals and Businesses at Year End by Type of Borrower (%) 2003-2007

BY MARKET SECTOR

Lending to Individuals

Loans Secured on Dwellings

Table 11: Amount of UK Bank and Building Society Lending Outstanding to Individuals Secured on Dwellings at Year End (£m), 2003-2007

Consumer Credit

Table 12: Amount of UK Bank and Building Society Consumer Credit Outstanding to Individuals at Year End (£m), 2003-2007

Table 13: Amount of UK Bank, Building Society and Other Lenders' Consumer Credit Outstanding to Individuals at Year End (£m), 2003-2007

Table 14: Amount of UK Bank, Building Society and Other Lenders' Consumer Credit Outstanding to Individuals by Type at Year End (£m), 2003-2007

Other Lending

Loans to Other Financial Institutions

Table 15: Amount of UK Bank and Building Society Lending Outstanding to Other Financial Institutions at Year End (£m), 2003-2007

Loans to Non-Financial Corporations

Table 16: Amount of UK Bank and Building Society Lending Outstanding to Non-Financial Corporations at Year End (£m), 2003-2007

Loans to Unincorporated Businesses and Non-Profit-Making Bodies

Table 17: Amount of UK Bank and Building Society Lending Outstanding to Unincorporated Businesses and Non-Profit-making Bodies at Year End (£m), 2003-2007

3. Industry Background

RECENT HISTORY

NUMBER OF COMPANIES

Table 18: Number of UK VAT-Based Enterprises Engaged in the Financial Intermediation Sector, 2003-2007

EMPLOYMENT

Table 19: Number of Employees Working in the Financial Intermediation Sector in the UK (000), 2003-2007

REGIONAL VARIATIONS IN THE MARKETPLACE

Table 20: UK Members of the Credit Services Association by Region (number and %), 2007

Mortgage Possession Notices

Table 21: Number of Mortgage Possession Notices in County Courts in England and Wales (number and %), First Quarters 2004-2008

Table 22: Number of Mortgage Possession Notices in County Courts in England and Wales by Region (number and %), First Quarter 2008

Table 23: Number of Mortgage Possession Actions in County Courts in England and Wales (number and %), 2003-2007

Table 24: Number of Landlord Possession Actions in County Courts in England and Wales, 2003-2007

Individual Insolvencies

Table 25: Number of Individual Insolvencies in the UK by Type by Region 2003-2007

Company Liquidations

Table 26: Number of Company Liquidations in the UK, 2003-2007

Table 27: Company Liquidations as a Percentage of the Number of Companies Registered† in Great Britain, Fourth Quarter 2003-2007

DISTRIBUTION

HOW ROBUST IS THE MARKET?

Table 28: Number of Mortgages Outstanding and Number of Mortgages at Least 3 Months in Arrears in the UK (000, number and %), Years Ending December 2003-2007

Table 29: Number of VAT-Based Enterprises Engaged in the Financial Intermediation Sector by Age of Business (number and %), 2007

LEGISLATION

The Consumer Credit Acts 1974 and 2006

The Enterprise Act

Home Credit

Insolvency Laws

KEY TRADE ASSOCIATIONS

APACS

The Asset Based Finance Association

Consumer Credit Trade Association

Council of Mortgage Lenders

Credit Services Association

Federation of European National Collection Associations

Foundation for Credit Counselling

Finance & Leasing Association

International Capital Market Association

Other Organisations

4. Competitor Analysis

THE MARKETPLACE

MARKET LEADERS

Accuma Group PLC

Company Structure

Current and Future Developments

Financial Results

Cattles PLC

Company Structure

Current and Future Developments

Financial Results

Fairpoint Group PLC

Company Structure

Current and Future Developments

Financial Results

Intrum Justitia Ltd

Company Structure

Current and Future Developments

Financial Results

iQor Ltd

Company Structure

Current and Future Developments

Financial Results

London Scottish Bank PLC

Company Structure

Current and Future Developments

Financial Results

Provident Financial PLC

Company Structure

Current and Future Developments

Financial Results

S&U PLC

Company Structure

Current and Future Developments

Financial Results

OTHER COMPANIES

Allied International Credit (UK) Ltd

BCW Group PLC

Cashflow Services Ltd

Controlaccount PLC

Debts.co.uk PLC

Loanmakers (Holdings) PLC

Moreton Smith Ltd

Mutual Clothing and Supply Co Ltd

Philips Collection Services Ltd

OUTSIDE SUPPLIERS

Equifax PLC

Euler Hermes UK PLC

Experian Group PLC

ICC Information Ltd

Marston Group Ltd

Regal Credit Consultants Ltd

MARKETING ACTIVITY

Main Media Advertising Expenditure

Table 30: Main Media Advertising Expenditure on Debt Management Services (£000), Years Ending March 2005-2008

Table 31: Main Media Advertising Expenditure on Debt Management Services, by company (£000), Year Ending March 2008

Exhibitions

5. Strengths, Weaknesses, Opportunities and Threats

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

6. Buying Behaviour

MOST POPULAR SOURCES OF CREDIT

Table 32: Most Popular Sources of Credit† Used in the Past 12 Months by Type (% of adults), 2007

Table 33: Selected Sources of Credit Used in the past 12 Months by Type, by Sex, Age, Social Grade and Region (% of adults), 2007

ATTITUDES TOWARDS CREDIT AND DEBT

Table 34: Consumer Attitudes Towards Consumer Credit and Debt (% of adults), 2007 and 2008

Table 35: Consumer Attitudes Towards Consumer Credit and Debt — Analysis of Selected Statements (% of adults), 2008

Table 36: Consumer Attitudes Towards Consumer Credit and Debt — Analysis of Selected Statements (% of adults), 2008

7. Current Issues

EUROPE

Consumer Credit Directive

The POLITICAL SCENE

Payment Protection Insurance

OFT Warns Consumers About Misleading IVA Mailings

MARKET TRENDS

New Standards for IVAs Providers Come Into Force

Credit Services Association Debt Manifesto

CONSUMER TRENDS

Personal Insolvencies Expected to Rise

Demand for Home Repossession Advice Soars

Increase in Number of People Taking Out Debt-Collection Plans

Financial Services Authority Campaign to Help Consumers Make Informed Financial Decisions

Consumer Credit Counselling Services

CORPORATE ACTIVITY

LEGISLATION

Tribunals, Courts and Enforcement Act 2007

Consumer Credit Act 2006

TECHNOLOGY

Home Credit Price Comparison

8. The Global Market

INTRODUCTION

GLOBAL COMPARISONS

The US

Table 37: US Consumer Credit Outstanding by Type of Credit ($bn), 2003-2007

Table 38: Total Number of Bankruptcy Filings in the US by Type, Year Ending 31st March 2004-2008

Table 39: Foreclosure Filings in the US (number and %), 2007

Europe

Table 40: Value of Mortgage Debt in the EU-27 by Country (_m), 2006

Table 41: Per-Capita Mortgage Debt in the EU-27 by Country (_000), 2006

9. Forecasts

INTRODUCTION

Total Amount of Lending Outstanding at First Quarter 2008

Table 42: Total Amounts of Lending Outstanding by Type of Borrower (£m), First Quarter 2008

THE ECONOMY

Population

Table 43: Forecast UK Resident Population by Sex (000), Mid-Years 2008-2012

Gross Domestic Product

Table 44: Forecast UK Growth in Gross Domestic Product in Real Terms (%), 2008-2012

Inflation

Table 45: Forecast UK Rate of Inflation (%), 2008-2012

Unemployment

Table 46: Forecast Actual Number of Unemployed Persons in the UK (million), 2008-2012

FORECASTs 2008 to 2012

Table 47: Forecast Total Amount of Bank and Building Society Lending to Individuals and Businesses Outstanding at Year End (£bn), 2008-2012

market Growth

Figure 2: Growth in the Forecast Total Amount of Bank and Building Society Lending to Individuals and Businesses Outstanding at Year End (£bn), 2003-2012

FUTURE TRENDS

Home Repossession Orders Continue to Climb

Company Liquidations and Individual Insolvencies Rise in the First Quarter of 2008

Gross Mortgage Lending to Fall Sharply in 2008

Inflation Rise Could Lead to Increase in Interest Rates

10. Company Profiles

Cattles Plc

Intrum Justitia Ltd

London Scottish Bank PLC

Provident Financial Plc

11. Further Sources

Associations

General Sources

Government Sources

Other Sources

Bisnode Sources