Executive Summary : As at the end of 2006, the total amount of lending outstanding (or debt) in the UK was £1,868.1bn, a rise of 12.9% on 2005 and 48.2% higher than the figure recorded in 2001. The amount of debt in the UK is currently a matter of considerable debate and concern.

This Market Report covers lending to both individuals, including consumer credit and loans secured on dwellings; and corporate bodies, including other financial corporations, non-financial corporations, unincorporated businesses and non-profitmaking organisations. In 2006, the largest sector was loans secured on dwellings, and the fastest-growing sectors between 2001 and 2006 were loans made to other financial corporations and loans to non-financial corporations.

The debt management and credit industry is faced with an ongoing array of legislation and regulatory changes. The most important of these included the introduction of the Consumer Credit Act 2006, which principally amends the Consumer Credit Act 1974.

The Competition Commission has also introduced measures aimed at increasing competition in the home-credit market, and the British Bankers' Association (BBA) and representatives of the Individual Voluntary Arrangement (IVA) industry have agreed to work together to create industry standards for that sector. The Financial Services Authority (FSA) has also commenced an investigation into the British sub-prime mortgage market and will assess, among other investigations, whether mortgage borrowers with poor credit histories are being treated fairly by lenders.

The IVA is one of the growth sectors of the debt management industry. Companies that provide IVAs for people who are unable to pay their debts receive fees from creditors for administering the scheme. However, the creditors involved, which include banks and other lenders, have decided to substantially reduce the fees they pay to the IVA providers. These reductions are expected to have a severe impact on the providers, and many have had to change their business plans considerably to accommodate the change.

The amount of lending outstanding to UK borrowers is forecast to continue to rise up to 2011, especially within the business sector. However, increases in UK interest rates could have a serious impact on the market and result in an increase in the number of borrowers defaulting on their loans. If this situation materialises, then demand for the services of debt management companies looks likely to remain strong.

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