Executive Summary

In 1997, the UK market for factoring and invoice discounting enjoyed 17.8% growth in value against 1996; with 69.1% of the business coming from invoice discounting, and an increase of 26.1% in international business. Economic forecasts for the year ahead, however, point to a slowdown in UK investment, which could have a detrimental effect on the factoring market and be accompanied by particular challenges for small business exporters, caused by a continuing strong pound, and the imminence of the European monetary unit (EMU). The accompanying fiscal tightening, intended to slow the present levels of consumer spending to more sustainable levels, is unlikely to feed through to the UK debt recovery market for at least 2 years. However, the Government's attack on poor UK payment practices through its Late Payment of Commercial Debts Bill, and the overall improvement taking place in credit management practices, could affect the quality of debts that do become overdue and increase the costs of recovery.

At the end of 1997, the value of total commercial and consumer lending by UK banks, building societies and finance houses reached around £921bn, of which Key Note estimates between 2% and 4% is likely to fall into arrears. This would provide a short and long-term debt recovery market valued at between £18bn and £37bn. The average UK household is spending between £500 and £3,500 each year on items likely to be available on credit terms in a market valued at between £12bn and £82bn. Hire purchase and mail order instalment payments are the most popular form of credit purchase, used by 8.3% of UK adults, followed closely by credit card purchases, which are used by 7.9%.

Key Note forecasts that by the year 2002 at current prices, the UK market for factoring and discounting will increase by 85.7% to reach £110.8bn. Growth during 1998 and over the next 2 years will average 15% per annum at current prices. (In real terms at 1998 prices, the average per annum increase will be nearer to 12.5% per annum.) It will then accelerate to an annual growth rate of 20% per annum by 2002. Invoice discounting will continue to slowly expand its share of the business, reaching £84bn (75.5%) by the end of the forecast period.

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