The UK consumer debt solutions market has its roots in the Insolvency Act (1986) which created Individual Voluntary Agreements (IVAs) and, by introducing the role of the intermediary to consumer debt management, led to the establishment of informal Debt Management Plans (DMPs).
Analysis of both company revenues and insolvency statistics suggest that the industry is now approaching £400m in size. It grew strongly during the period up to 2010, as expanding consumer lending led to high personal debt levels. Since then, despite a harsher economic climate with increased unemployment, low wage growth and high borrowing costs which has led to ever more people falling into insolvency, market growth has been checked.
While the enduring recessionary environment currently being experienced is a particularly potent one for DMPs, the factors behind the slowing of the market include pressure on fees, changes in product mix and the tighter consumer credit market: levels of unsecured debt in 2011 fell below what they had been in 2005 hence fees related to repayment levels were correspondingly lower.
New financial products, such as payday loans, now have an important role in the marketplace with some consumers using them to service other debts. However, high interest rates – and the possibility of regulation – mean this may not be sustainable.
The market is served by large players, such as Think Money, Paymex and Fairpoint, sometimes referred to as 'factories', as well as a long tail of smaller practitioners and a significant not-for-profit sector. In recent years, leading providers have expanded their product ranges, sometimes by acquisition, to increase their chances of being able to provide a solution to every potential customer, and reshaped their businesses to respond to take advantage of growth segments and fee
The outlook for the industry is complex with uncertainty over when the economy will recover, what impact the recovery will have on the market – as it could ease pressure on debtors but also allow them to run up bigger debts – and also regulation: the OFT is currently looking at Payday Loans and DMP regulatory power moves to the new FCA in April 2014.
In this report we review the UK consumer debt solutions industry. We quantify the market size and historical growth rates while reviewing key factors behind these figures and exploring drivers of profitability.
We also carry out an in-depth analysis of the drivers of industry growth – in particular relevant economic and market indicators such as total consumer borrowings, unemployment levels, debt write-off rates, collections rates and levels of personal insolvencies. Our analysis of historical trends and forecasts is anchored in this information.
While many reports on the industry contain data and description, a critical objective for us in writing this report has been to prioritise our insights and conclusions
We believe that, in order for those involved in the market to make the best decisions in this complex and changing environment, they need to have access to the best information and understanding of the trends and drivers. The aim of this report is to provide this.
It is intended for debt solutions providers themselves as well as investors, banks, analysts, consultants and other parties with interests in the sector.
This report is based on:
- Publicly available data including company annual reports, websites, press releases and government statistics
- Interviews with senior-level contacts in the market
- In-depth analysis of the macroeconomic environment and other relevant market drivers
- Information from these sources has been synthesised and presented clearly and concisely with extensive use of charts and tables to illuminate points and support conclusions
Click for Report details:UK Consumer Debt Solutions: Market Insight Report