Affording change

This week, outside of eating my first mince pie, I seem to have been preoccupied with higher energy bills and consumer spending in the run-up to Christmas and how big a debt repayment hangover will be in the new year.

Traditionally January and February are always been high volume months for customers falling into the arrears process (get ready now to prepare), but I just wonder if this is going to be bigger than ever this year, with the potential for much wider further knock-on impacts economically too.

It’s not their fault honest

Take energy costs. I have written about this previously, but this week IO heard more stories of monthly fuel bills increasing with customers forced off their great fixed rates onto much higher Standard rate tariffs (60-80% in some cases).

Even on my local Facebook group (admittedly not always a very scientific sample of public opinion, albeit with lots of opinions), there was plenty of talk and shock at the price increases, with some final dismay at just where they were going to find the extra money or stay warm.

Some of this resulted in anger, much of this at energy companies, with assumptions they are raking in profits. But, as someone helpfully pointed out, this really is not the case. Unless you are sitting on paid for land extracting gas reserves… it seems they are losing money too, in fact, most of us are…

Even those sitting pretty on locked-in fixed-price contracts, only have time on their side until these expire… and with the price cap to change again in April, there is likely to be a further shock in the spring too… it is just not great all around.

Wrinkles in approach

The big recent news in this of course has been the insolvency of Bulb. It is now in administration, customers appear on the same deals, with the gap apparently being funded by the government.

Elsewhere in the market, the large energy suppliers have been taking on the customers from smaller suppliers at a rate of knots. However, each of these customers on a standard tariff is still loss-making, with no apparent subsidy to make up the difference.

The situation at face value seems somewhat inconsistent, and you have to wonder if larger scale subsidies are heading to energy suppliers to keep them afloat, should this situation continue. It just seems untenable.

The icing on the (Christmas) cake

And then onto Christmas and Christmas spending. With mince pie season starting the ramp-up to the holidays is now well and truly underway.

With the feeling that Christmas was cancelled last year, the streets seem busier and fuller than we have seen for a long time. Even the announcement of this new Omicron COVID variant does seem to have damped spirits… the motto “have mask.. will carry on (shopping)” seems appropriate.

And this is reflected in the lending data too. Seemly there have been increasing applications for credit amongst younger people and reports of extensive use of Buy-Now-Pay-Later this year.

It all points to increasing debt loads, which will of course will have to be paid back in the New Year.

New Year Cheer?

So could we see combining effects? Consumers having to find that extra money for increased expenses and energy, also with increased monthly debt repayments?

Consumers, faced with such a situation will have to prioritize… and keeping warm is important, so as we know it will result in increased arrears, particularly in unsecured financing areas such as loans, credit cards and BNPL.

If you run an operation it is time to get ready, and especially have digital alternatives to handle the volume, should this materialise as is feared.

However, this turns out, mind you, it is going to be an interesting New Year for sure.

Have a good week(end) everyone.

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