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KN67021 KEY NOTE DEBT MANAGEMENT (COMMERCIAL & CONSUMER) MARCH 2001

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This report covers: debt management, credit services, pre-debt activities, post-debt activities, debt collection, borrowing, banks, building societies, commercial credit, consumer credit, lending, retail credit, payment period, due date, debtor days, CMRC, creditor days, aged debt, bank transfers, late payment indicators,

Companies covered include: Credit Management Research Centre, Cattles, Intrum Justitia Group, Legal & Trade Financial Services, Equifax, London Scottish Bank, Provident Financial, Allied International Credit, Bailiff Company, Braby & Waller, Capital Management, Controlaccount, Credit Limits, International Debt Recovery Services, J&M Strategic Solutions, JB Debt Recovery, Mason Hayes & Curran, Midlands Investigations, Status Enquiry Bureau,

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EXECUTIVE SUMMARY

According to Bank of England statistics, the total volume of outstanding lending in the UK reached £1,114.2bn in 2000 — an increase of almost 40 percent since 1996.
The largest increase has been in the growth of consumer credit, and in particular credit card borrowing. UK citizens spend more as a proportion of gross domestic product (GDP) on plastic than in any other country in Europe.
In 1998, the Late Payment of Commercial Debts (Interest) Act was introduced to help businesses. The legislation has already been extended, and further expansion is due. In August 2000, a new EU directive on late payment was issued, and the Better Payment Practice Group (BPPG) is already working with the Government’s Small Business Service on its future implementation.
The Citizens Advice Bureau has recently reported a sharp increase in debt problems, fuelling fears that people are being encouraged to borrow more than they can afford. The problems created by mounting consumer debt are at last beginning to gain more recognition in the UK and throughout Europe.
A full investigation into current marketing and lending practices is underway, designed to improve the quality of information given to consumers, and ensure responsible lending decisions by all lenders. More attention is being devoted to the better education of consumers and the improved trading standards needed from suppliers and the providers of financial services. Key Note forecasts that the total outstanding lending in the UK will increase by 18.1 percent between 2001 and 2005.

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TABLE OF CONTENTS

Executive Summary 1
1. Market Definition 2
REPORT COVERAGE 2
Bank and Building Society Lending 2
Commercial Credit Services 2
Consumer Credit 3
Consumer Credit Services 3
MARKET SECTORS 4
Bank and Building Society Lending 4
To Individuals Secured on Dwellings 4
To Other Financial Corporations 4
To Industrial and Commercial Companies 4
To Unincorporated Businesses and Non-Profit Organisations 4
Consumer Credit 4
MARKET TRENDS 5
Consumer Credit 5
Increasing Business Costs 5
Retail Credit and Household Consumption 6
Financial Trends by Sector 6
MARKET POSITION 7
Table 1: Categories of Measurable Lending in the UK, 2000 8
SURVEY RESULTS ON CORPORATE DEBT 8
Survey Highlights 9
The Survey Panel 9
Table 2: The Structure of the CMRC Quarterly Panel (number of companies), 2000 10
Payment from Customers 10
Table 3: Payment Period Beyond the Due Date (Median) by Turnover of Respondent (£m and number of days), 2000 10
Table 4: Quarterly Change in Payment Beyond Due Date — Actual Versus Expected, 2000 11
Payment to Suppliers (Domestic) 12
Difference in Payment Period Beyond Due Date (Domestic) 12
Debtor Days 13
Table 5: Quarterly Change in the Level of Debtor Days — Actual Versus Expected, 2000 13
Creditor Days 14
Net Credit Days 14
Age Debt Profile — Overdue Accounts 14
Table 6: Quarterly Change in Customer Accounts 30 Days Overdue — Actual Versus Expected, 2000 15
Aged Debt by Sales Value 15
Payment Terms and Methods 16
Late Payment Indicators 16
Awareness of Late Payment Legislation 17
Late Payment of Accounts 17
Factors Affecting Late Payment 17
Credit Sales 18
Credit Monitoring 18
The UK Debt Management Industry 18
The Cost of Bad Debt 18
Debt Collection Process 18
KEY TRADE ASSOCIATIONS 19
Consumer Credit Association 19
Credit Management Research Centre 19
Credit Services Association 19
Federation of European National Collection Associations 20
Finance & Leasing Association 20
2. Market Size 22
THE TOTAL MARKET 22
Table 7: The Volume of Outstanding Commercial and Consumer Lending by UK Banks, Building Societies and Financial Institutions (£bn), 1996-2000 22
Table 8: The Volume of Outstanding Commercial and Consumer Lending by UK Banks, Building Societies and Financial Institutions (index 1996=100), 1996-2000 23
BY MARKET SECTOR 24
Bank and Building Society Lending 24
To Individuals Secured on Dwellings 24
Table 9: Bank and Building Society Loans to Individuals Secured on Dwellings (£m seasonally adjusted), 1996-2000 24
Table 10: Lending by Major British Banking Groups to Individuals Secured on Dwellings (£m and percent), 1996-2000 25
To Other Financial Corporations 25
Table 11: Bank and Building Society Lending to Other Financial Corporations(£m seasonally adjusted), 1996-2000 25
To Industrial and Commercial Companies 26
Table 12: Bank and Building Society Lending to Industrial and Commercial Companies (£m seasonally adjusted), 1996-2000 26
To Unincorporated Businesses and Non-Profit Organisations 26
Consumer Credit 26
Table 13: Major British Banking Groups’ UK Consumer Credit (£m), 1996-2000 27
Finance & Leasing Association 27
Table 14: Finance & Leasing Association’s Members’ New Business (£m), 1995-1999 28
OVERSEAS TRADE 28
Grant Thornton Survey 28
Europe’s Small and Medium-Sized Enterprises and the Euro 29
Imports and Exports 30
Table 15: UK External Balance Sheet by Balance of Payments (£bn), 1990-2000 30
Table 16: Total UK Exports and Imports of Goods and Services and Total Balance of Trade at Current Prices (£m), 1995-1999 31
UK Competitiveness Indicators 31
Europe’s Late Payers 32
Table 17: European Average Payment Periods (number of days), 1996-2000 32
3. Industry Background 33
RECENT HISTORY 33
Personal Lending 34
Small Business Borrowing 34
Table 18: Sources of Finance — Bank Lending to UK Small Businesses (£bn), 1998-2000 34
Insolvencies 35
Table 19: Individual and Company Insolvencies in England and Wales by Quarter, 1999-2000 35
Payment Periods 35
Table 20: Average Payment Period Following Invoice (number of days), November 2000 36
INDUSTRY CONCENTRATION 38
Table 21: Number of VAT-Based Enterprises Engaged in Credit Reporting and Collection Agency Activities by Turnover Sizeband (£000), 2000 38
REGIONAL VARIATIONS IN THE MARKETPLACE 38
Business Failures 38
Table 22: Number of Business Failures in the UK by Region, January to December 1999 and 2000 39
Business Confidence 39
London and the South East 40
East 40
South West 40
East Midlands 40
West Midlands 41
North East 41
Wales 41
Scotland 41
DISTRIBUTION 41
HOW ROBUST IS THE MARKET? 42
LEGISLATION 42
The Late Payment of Commercial Debts (Interest) Act 1998 42
Representation of People’s Act 43
Sales of Financial Serviceson the Internet 43
EU Late Payment Directive 43
4. Competitor Analysis 44
INTRODUCTION 44
MARKET LEADERS 44
Leading Debt Management Companies 44
Cattles PLC 44
Financial Results 44
Intrum Justitia Group 45
Financial Results 46
Legal & Trade Financial Services Ltd 46
Financial Results 47
London Scottish Bank PLC 47
Financial Results 47
Provident Financial PLC 47
Financial Results 48
Other Companies 48
OUTSIDE SUPPLIERS 49
ADVERTISING AND PROMOTION 49
5. Strengths, Weaknesses, Opportunities and Threats 51
STRENGTHS 51
WEAKNESSES 52
OPPORTUNITIES 52
THREATS 53
6. Buying Behaviour 54
USE OF CREDIT 54
Table 23: Use of Different Forms of Credit ( percent of adults), 1996-2000 54
OWNERSHIP OF STORE CARDS 55
Table 24: Ownership of Retailer Store Cards by Adults in Great Britain (000), 1998 and 2000 55
USE OF HOME-COLLECTED CREDIT 55
Table 25: Use of Home-Collected Credit (000 and percent of adults), 1998 and 2000 55
PENETRATION OF MORTGAGES 56
Table 26: Types and Sources of Mortgages held by Adults in Great Britain ( percent), 1996, 1998 and 2000 57
PLASTIC CARD FRAUD LOSSES 57
Table 27: Total Plastic Card Fraud Losses of UK Card Issuers (£m and percent), 1995-1999 58
7. Current Issues 59
INCREASE IN CONSUMER DEBT 59
REVISED BANKING CODE 59
COMPETITION COMMISSION’S PROVISIONAL CONCLUSIONS 60
DEBT COLLECTORS DIPLOMA 60
BETTER PAYMENT PRACTICE GROUP 61
FINANCE & LEASING ASSOCIATION 61
IMPROVEMENT IN NEW CAR FINANCE 61
INTERNET DEVELOPMENTS 62
Marks & Spencer Financial Services 62
Freeserve And Barclays 62
INTERNET LENDING 62
Quotations on the Internet 62
Selection Criteria 62
Loan Transactions on the Internet 63
Study Conclusions 63
8. The Global Market 64
EUROPEAN PAYMENT HABITS 64
Late Payment 64
The Causes of Late Payment 64
The Consequences of Late Payment 64
Domestic Payment Periods by European Region 65
Late Payment Legislation in Europe 65
UK LEADS EUROPE ON PAYMENT CARDS 66
Table 28: Credit and Debit Card Spending in the UK (£m and percent), 1999 and 2000 67
THE US 67
Credit Card Debt 67
Consumer and Commercial Lending 68
JAPAN 68
9. Forecasts 70
THE ECONOMY 70
FORECASTS 2001 TO 2005 70
Table 29: The Forecast Volume of Outstanding Commercial and Consumer Lending by UK Banks, Building Societies and Financial Institutions at Current Prices (£bn), 2001-2005 71
FUTURE TRENDS 71
10. Company Profiles 73
Cattles PLC 74
Legal & Trade Financial Services Ltd 76
London Scottish Bank PLC 78
Provident Financial PLC 80
11. Further Sources 82
Associations 82
Periodicals 84
Directories 85
General Sources 85
Bonnier Information Sources 86
Government Publications 87
Other Sources 87
Understanding TGI Data 90
Number, Profile, Penetration 90
Social Grade 91
Standard Region 91
Key Note Research 92
The Key Note Range of Reports 93

Text © 2001 Key Note

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Last updated by Jacob van Eldik 24th April 2001