While the issue of consumer debt is one of those great hot-button issues that has held a surprisingly large amount of interest for some time, no pun intended, it turns out it's a comparatively universal issue as well. Recently, the consumer debt collection market in the U.K. was valued at 500 million pounds sterling, or $802.8 million in U.S. dollars. While the industry has recently returned to profitability, margins are still relatively slim, and this is causing somewhat of an adjustment to the entire industry.
While it's easy to think that a recessionary environment like the one that started in 2008, and by many reports is still going on at least on some level despite official figures that say we've long since come out the other side--though oddly enough, some reports suggest we may be poised to enter a whole new recession--the same conditions that yielded plenty of business for debt collectors have also given rise to the biggest problem for debt collectors: debt that simply cannot be collected.
Debt collectors have had plenty of new opportunities to pursue uncollected debt, but at the same time, many debtors are unable to pay thanks to prolonged unemployment. The debt collection industry is, essentially, discovering the sheer impossibility of getting blood from a turnip, and while they have plenty of turnips, they need blood. Worse for the debt collection industry, future opportunities don't appear much brighter. Faced with a slug of debt that will likely never be collected, consumers are taking steps to reduce borrowing and keep unsecured debt levels to a comparative minimum, which in turn will limit the pool of potential debt to collect in the first place.
So far, as of 2011, fully 60 billion pounds sterling--$96.312 billion U.S.--has been passed to debt collection. Government agencies like the Treasury and HMRC--Her Majesty's Revenue and Customs--are starting to get more into the fray, passing on their own uncollected debt to collection agencies. The Credit Services Association even went so far as to say that member groups were handling 32 million unpaid debt cases by the end of 2011, which was up from 28 million just in the middle of the year. 32 million reportedly represented the equivalent of one significant debt for every single household in the U.K.
With no end in sight to difficult economic conditions, the likelihood that buyers will be unable to pay is substantial and staggering. With the equivalent of every U.K. household owing money, it's going to leave the economic engine cool in the U.K. for some time to come. The U.K.'s economic muscle is a large part of what keeps the Eurozone moving, even though they're not actually part of the European Union, they're still a major market located right next door. Considering what's going on in the rest of Europe right now, and the effect that will have on developing nations looking for a market, it should give an objective viewer cause for concern.
There's a massive market for debt collection in the U.K. right now, but with much of it beyond the ability to collect any time soon and new debt becoming rapidly limited, entering that market may prove to be starvation in the midst of plenty.
Edited by Brooke Neuman