UK Consumer Debt Collection: Market Insight Report

Apex Insight, August 2012, Pages: 42

In this report Apex review the UK consumer debt collection industry. They quantify the market size and historical growth rates while reviewing key factors behind these figures and exploring drivers of profitability.

Apex also carry out an in-depth analysis of the relevant 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

Why is it useful?
- Debt collection is a significant UK industry which has seen its fortunes vary dramatically in response to the economic environment
- Apex 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 collection agencies themselves as well as investors, banks, analysts, consultants and other parties with interests in the sector.

What are the sources and methodology?

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

The consumer debt collection market
Market definition
Adjacent markets

Market size and growth
Performance of the leading debt collectors

Market drivers
Discussion of market drivers
Driver trends

Market characteristics and trends
Industry attractiveness
Trends
Value drivers

Competitive landscape
Leading operators
Profiles of leading operators
Organisations with debt purchase as main focus which also have significant contingent collections business

Forecasts
Approach
Key drivers forecast
Market forecast
Risks to the forecast

List of Figures

UK Consumer debt management market size / £m
UK consumer debt collectors market size / £m
Revenue growth rates of leading debt collectors / CAGR %
Combined pre-tax margins of leading debt collection agencies / %
UK GDP in current prices (money GDP), inflation (GDP deflator) and real GDP / % annual changes
UK secured and unsecured household debt / £bn
Retail sales and bank and building society unsecured consumer debt / % annual change
UK bank & building society unsecured consumer debt written off / £bn, % of total unsecured consumer debt
Rates of unemployment and bank & building society unsecured consumer debt write-off / %
Number of personal insolvencies per year (England and Wales) / '000
Leading UK debt collectors by latest revenue / £m
Revenue growth rates of leading debt collectors / CAGR %
Latest pre-tax profit margins of leading debt collectors / £'000
Revenue per employee for leading debt collectors / £'000
Moorcroft summary financials
Wescot summary financials
Apex Credit Management summary financials
Interlaken Group summary financials
The Lewis Group Limited summary financials
Rossendales summary financials
Tessera Group Plc. summary financials
Credit Solutions Limited summary financials
NCO Europe summary financials
EOS Solutions UK Plc. summary financials
Intrum Justitia Limited summary financials
Link Financial Limited summary financials
1st Credit summary financials
Lowell Group summary financials
Equidebt summary financials
CapQuest Group summary financials
UK GDP in current prices, inflation (GDP deflator) and real GDP / % annual changes. Historical and forecast
Forecast UK secured and unsecured household debt / £bn
Rates of unemployment and bank & building society unsecured consumer debt write-off / %
Forecast UK bank & building society unsecured consumer debt written off / £bn, % of total unsecured consumer debt
UK consumer debt collection market size / £m

Debt Collection Agencies Face Uncertainty On Road To Recovery

New research into the outlook for the UK consumer debt collection industry has been released, which identifies market challenges and offers an insight into the potential for future growth.

Business intelligence organisation Apex Insight, whose clients include 1st Credit, Macquarie and OC&C, has based the research and forecasts on its experience of working in the sector, current industry trends, customer needs and the impact of macroeconomic factors.

Frank Proud, director of Apex Insight, says: “During the recession, conditions for collections agencies have become far less favourable. Consumers have taken steps to reduce borrowings, pushing unsecured debt levels below 2005 levels, while higher unemployment has led to more problem loans but also a far worse collections environment. As a result, agencies find that a higher proportion of debtors are simply unable to keep up repayments.”

The report shows that although the consumer debt collection industry, now valued at around £500m, returned to profit in 2010, margins remain significantly below pre-credit crunch levels with several operators having invested to purchase debt portfolios as a way to secure business for their collections operations.

Apex Insight does not foresee immediate relief on the horizon, with 2012 GDP growth forecasts tumbling, risk from the smouldering Eurozone crisis and the impact of government austerity policies prolonging high unemployment high and hence weakness in ability of the indebted to pay.

A further possible complication comes from the growing Payday Loans industry. Evidence suggests these are being used by many hard-pressed consumers to meet payments on credit cards and other unsecured loans. This means that, if the OFT’s review of that industry leads to the widely called-for tightening of regulation, the collections environment would worsen even further, while failure to regulate could simply create a bigger problem down the line.

Despite short term challenges, Apex Insight’s market forecast does expect the market to recover once a return to GDP growth and falling unemployment deliver a more benign collections environment. The report sets out how, and when, this recovery might take shape.

- Moorcroft
- Wescot
- Apex Credit Management
- Interlaken Group
- The Lewis Group Limited
- Rossendales
- Tessera Group Plc.
- Credit Solutions Limited
- NCO Europe
- EOS Solutions UK Plc.
- Intrum Justitia Limited
- Link Financial Limited
- 1st Credit
- Lowell Group
- Equidebt
- CapQuest Group

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