The subject of debt - consumer indebtedness, in particular - currently prompts a great deal of debate. Bank of England figures show that the amount of lending outstanding at year end rose by 8.5% in 2003, to £1,368.47bn, which represents an increase of 40.5% across the 1999 to 2003 period under review.
The report covers lending to both individuals (including loans secured on dwellings and consumer credit) and corporate bodies (including other financial corporations, non-financial corporations, unincorporated businesses and non-profitmaking organisations). As well as analysing outstanding volumes of debt and general trends within these sectors, it examines the specific functions of debt management companies, such as debt collection and factoring.
Factors impacting on the market for debt management include consumer confidence in the economy, consumers' willingness to take on debt and the cost of credit, all of which are directly related to wider economic trends, such as levels of unemployment and interest rates. A recent history of low interest rates and consequent cheap credit have led to record levels of consumer debt, which has raised concerns among economic commentators that a rise in interest rates or a more general economic downturn could make this debt burden unmanageable for many people.
Important in the field of consumer debt is the ever-increasing number of credit providers (for example store cards) that often charge very high rates of interest) and the intense competition between these providers. Many providers, particularly in the credit card sector, offer introductory rates of 0%, which are designed to encourage customers to migrate from other providers and which have the effect of encouraging consumers to take on large amounts of debt.
In the corporate sector, the rate of business failures has increased, thereby creating demand for debt management services and corporate borrowing, whether in the form of bank/building society loans or other forms of factoring and securitisation.
It is argued that the future development of the market will be influenced by moves towards the Europeanisation, or even globalisation, of the market for debt, among other things. The market will also witness the entrance of new players, some of which will cross over from other industry sectors, just as the supermarkets have moved into loan provision (sometimes aimed at consumers with poor credit history). It appears likely that the impact of
ever-cheaper credit, and easier access to it for consumers on lower incomes, will be to increase demand for debt management services.
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