Individual consumer debt in the UK is double that in other Western European nations and is responsible for a third of all unsecured debt in the region, according to the latest research report from Datamonitor.
It says the UK consumer credit market hit €314bn (£215bn) in 2005 but is now reaching saturation point with Datamonitor suggesting UK lenders would be better off looking overseas for business.
The UK consumer credit market has been growing slowly in recent years, and will continue to grow at a slower pace than countries such as France, Ireland and Spain. The fastest growing Western European markets are Turkey and Greece, the reports says.
“These markets are where the real opportunities exist, but only for players brave enough to enter,” Paul Marsh, financial services analyst at Datamonitor.
While the average Western European owes €2,278 (£1,558) of unsecured debt, the average UK consumer owes over twice as much at €4,642 (£3,175), according to the report. It also says many major European countries have a culture of saving and frugalness compared to the UK, and countries such as France and Germany appear particularly debt adverse.
That said there are signs this is changing, according to Marsh.
He says: “UK lenders looking for business opportunities should look oversees to realise their expansion plans. The UK is an increasingly difficult place to do business, due to the highly indebted nature of the population. Yet in many other European countries consumers are not as indebted and the markets are not as sophisticated.”
He claims the UK consumer credit market has grown at 2.7% per year over the last five years, compared with a Western European which market has grown at 8.3% per year. Faster growing markets offer opportunities for lenders and many European markets are also not as developed as the UK adds the report suggesting this allows lenders to bring products readily available in the UK to a “naïve market.”
The report suggests Germany would be fertile ground for lenders arguing borrowing on revolving credit cards in Germany is not popular.
"Any lender that can convince a sizeable proportion of the German population to use their credit card will be very successful," the report adds.
But it also warns infrastructure problems will have to be overcome for this to be a success. The question for lenders is whether to enter Western European markets by acquisition or as a start-up.
Meanwhile another report released today by debt adviser One Advice shows 2.4m young people are juggling average unsecured debts of up to £2,860 piling on the financial pressure as they start their first jobs or go into further education.
It says 18 to 24 year olds in debt owe the money on a range of products including credit cards, personal loans, overdrafts and loans from family and friends.
But it claims average amounts don’t tell the whole story – as many as 108,000 18 to 24 year olds owe more than £5,000 on credit cards while almost 275,000 have overdrafts of more than £1,000.
Credit cards are the most widespread form of debt with more than 1.2m young adults owing an average £1,471.
Chris Holmes, chief executive, One Advice said: “Debt is a way of life and it is disturbing to find that so many young people who are just starting their working lives are doing so while weighed down by so much debt. It is even more shocking to see 18-24-year-olds with credit card debts of more than £5,000. Many borrow the money without understanding the implications of the rate of interest charged.
“We are all aware of the debt problems students face while studying but this shows that it’s not just those in further education who are going into the red regularly.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Matthew West on 020 7484 9893 or email [email protected].IFAonline
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