Demand for debt advice could soar, expert warns
A new report, produced by University of Nottingham economist Dr John Gathergood, warns if independent forecasts are right and unemployment continues to rise, the demand for debt advice will exceed that seen at the peak of the financial crisis by the middle of next year.
Between 2008 and 2009, the number of individuals seeking debt advice soared to record levels. More than one-and-a-half million people sought help with money problems — an increase of 350,000.
Gathergood’s report, Demand, Capacity and Need for Debt Advice in the UK, has been produced on behalf of the Money Advice Trust and seeks to estimate future demands for debt advice across the free-to-client and other debt advice sectors and how these services will cope in the future.
Dr Gathergood, an expert on credit, debt and borrowing in the Centre for Policy Evaluation in the School of Economics, said: “Despite demand for debt advice currently being at near all-time high levels in the UK, the scale of potential need for debt advice among households remains much greater than the level of advice currently sought. At any time up to five million individuals report arrears on consumer credit, failure to keep up with their mortgage payment obligations, or that meeting their credit commitments is a ‘heavy burden’. Of these, only one in six seeks advice from any source, and even fewer seek advice from the free-to-client advice sector.”
In 2010, the free-to-client sector will have provided advice to 1.4 million individuals from 1.2 million households. The stabilisation of demand in 2010 is, says Gathergood, due in large part to the moderation in unemployment growth and modest reductions in the cost of credit.
If unemployment falls in line with Office for Budget Responsibility (OBR) forecasts demand for debt advice will moderate over 2011-2012. However, if independent forecasts are right by mid-2011 demand for advice will exceed that seen at the peak of the financial crisis in later 2009.
Gathergood said: “Statistical analysis suggests that individuals with the greatest level of problem debts are more likely to seek advice, yet still the majority of consumers with problem debt do not. Socio-economic and demographic factors play a large role in determining whether an individual with problem debt chooses to seek advice: men, married couples, those with children and individuals from an ethnic minority background are all less likely to see debt advice for a given debt problem.”
