The Bank of England Quarterly Credit conditions survey was released earlier today. Prior to the release, Deloitte research indicated that business confidence was growing as the number of companies going into administration fell and the CFOs of the UK's biggest firms were turning focus towards expansion. The expectation was that this would lead to an improvement in arrears levels for medium-sized companies, where the figures have remained stable over the past six months but should start falling as the economy recovered.
The position in relation to arrears for small businesses was less clear as arrears had remained high in the first half of 2013 and it could take several months for them to drop. Recovery in this sector is dependent to a greater extent on increased spending by larger companies generating more business for these smaller firms. Arrears levels for secured and unsecured lending for consumers have been falling over the past six months and were expected to continue this trend.
However, the actual results were very interesting and not completely in line with expectations. The Bank of England's figures highlighted how many consumers are still struggling with debts where, although the number of consumer credit card defaults has fallen by about a fifth, the size of a typical default has risen over the last three months. Default rates for larger companies also rose by 10%, when in the previous quarter it was expected that these would fall by 1.5%. We still expect defaults among this group to fall over the coming months as long as the economy continues to recover.
Damian
Hales
Damian is a Partner in Risk and Regulation practice at
Deloitte, specialising in Credit Risk Transformation including
collections and recoveries.
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