Britain’s ‘Broken economy’ causing record levels of household debt
19th September 2019.
Analysis from the TUC has shown that unsecured debt per household has risen to record levels.
The average household debt rose to £15,880 in the first quarter of 2019, up £1,160 on a year earlier.
More than half of households report having unsecured debt, most commonly in the form of credit card debt (60%), overdraft (28%), personal loans (25%) and car finance (25%).
The research showed that young people are disproportionately likely to be in debt with 70% of 18-34 year-olds report having a type of unsecured debt.
Only this morning we wrote about the reasons why millennials are going bankrupt
The TUC says that persistent low pay is the key driver of household debt.
As we also wrote this morning, Britons are worse off than in 2008 as real wages are still lower than they were before the 2008 crisis and working families are struggling to make ends meet without going into the red.
For those households with unsecured debt: 20% say repayments are a ‘heavy burden on their finances.’
14% have fallen more than two months behind on repayments in the last year.
And 45% don’t feel that they have enough money set aside for emergencies.
TUC General Secretary Frances O’Grady said “Our broken economy is forcing working families deep into debt. Low pay, insecure work and austerity have pushed millions of households to the financial cliff edge. Big corporations are raking in huge profits at working people’s expense. And successive governments have done nothing to avert the crisis.”
“It’s time to reset the balance of power in our workplaces and our economy. The Government must make more employers negotiate pay and conditions with unions. That will lift wages for everyone and stop working families having to rely on credit cards and overdrafts to get through the month.”
Record numbers seeking debt advice
Separately, debt charity StepChange have revealed that a record 331,337 people contacted them for help with their debts in the first six months of 2019.
The charity’s latest Statistics Mid-Year Update reveals that of the 190,484 new StepChange clients who received full debt advice, the average level of unsecured personal debt was £13,799.
This represents a rise of 2% in the past six months and 6% since 2016.
31% of those new clients’ reported that outgoings exceeded their incomes. The average monthly deficit for clients with deficit budgets is a worrying £365.
Debt getting out of control was often caused by an expected event with a fall in income (18%), injury or illness (16%) or unemployment or redundancy (16%) being the three biggest reasons.
Phil Andrew, CEO of StepChange Debt Charity, said “These statistics provide a sobering assessment of the scale of problem debt in this country. Across the board we are seeing red flags, including worrying proportions of new clients falling into debt due to reduced income, illness or because they rely on credit to pay for day-to-day living expenses.”
“Clearly more and more households are struggling to hang on and are ill-equipped to deal with any economic shocks the future may hold.”
“These figures must act as a wake-up call to the Government, who have a real opportunity to tackle some of the drivers of debt in the upcoming Queen’s Speech and beyond. By taking concerted action to curb unlawful bailiff behaviour and waking up to the impact the five-week wait for Universal Credit is having on those who have experienced a sudden drop in income, it can go some way to stemming the rising tide of those in problem debt.”
Key Issues causing problem debt in the UK.
31% of new clients were in arrears for council tax a slight increase on 2018 (30%).
In the first half of 2019, 43% of StepChange clients were identified as having an additional vulnerability on top of their financial difficulty, while half of clients (49%) identified as vulnerable have a mental health issue.
Vulnerable clients have an average monthly income of £1,276, more than £200 lower than the average for all clients (£1,518), and they are also more likely to be behind on their household bills.
Single parents also were over-represented among new clients compared to the general population, making up one quarter of (24%) compared to just 6% of the general population that fall into this bracket. This proportion has risen by a third since 2014, when 18% of new clients were single parents.
It is also notable that a higher proportion of single parents (34%) had outgoings that were more than their incomes compared to the average of 31%.
Also the overwhelming majority are renters (90%).
All of which will be worrying news to those who supply on credit to consumers, or supply on credit to those exposed to consumers.
Do you sell on credit?
With pressures on the cash flow it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.
Those customers will look for the easiest option to boost their cash-flow. Don’t let it be you.
You can’t just assume your customers can and will pay you eventually, no matter how big their name is.
It is essential to have credit management systems in place to monitor and check your customers credit worthiness.
It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.
About CPA
The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply on credit, help us help you identify the risks.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are extremely passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cash-flow.
Don’t let your bankers control you, contact CPA today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you realise you could be sitting on a fortune?
Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.
If you sold B2B on credit then there may be a hidden source of capital you can call on.
If you fancy an bit of extra cash in your business, rather than jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.
Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.
We can help you uncover the pile of gold, you didn’t even know you were sitting on.
If you trade with other businesses and were often paid late then you could be entitled to significant compensation.
Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.
Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.
You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.
That compensation could provide the cash boost your business needed.
But don’t delay, that compensation evaporates if not claimed within six years of the late payment.
How can CPA help?
CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.
We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.
Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.
CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.
The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.
We do the work, you receive the cash.
If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.
We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.
We are helping business owners who are looking to boost the returns from their business before they retire. We are helping businesses who have lost major clients after years of loyal service to get properly compensated for systematic late payment. We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.
Those former clients who regularly paid you late can finally be made to pay.
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections