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.

The big event of last week was the Credit Strategy Collections and Vulnerability summit featuring the U&T conference.  It was an interesting event, discussion, and once again an opportunity to meet people in person.

As previously discussed, meeting people, in person for the first time, can feel a strange experience and it was not much different this time around.  However, what I did notice was if I knew someone well from video calls, that once we were over the initial “hello” our discussion would then carry on as if we had known each other for a long time…. which I suppose we had, just on video.  It really did all feel very natural.

I suppose this is not that surprising, but it does seem all that discussion, and work, getting to know people over lockdown, really does pay off.  It is not really reset on meeting, so good news.

There were also a couple of interesting themes at the conference itself.

The great return to the office.

Much discussion I have heard up until now has swirled around the many benefits of remote working and continued working on a hybrid basis.  This week however I happy started to increasingly hear more arguments from supporters for an office return. 

Having not had the weight of events on their side until now, they are clearly starting to feel more confident.  Arguments were being vocally pressed, explaining how ‘employees are just so happy to be back’.

Of course, much of this will depend on the demographic, age of workers and role type, it is unlikely to be one-size-fits-all.  It does feel like waiting to ask the question again, after any initial excitement from meeting people again subsides, is probably worth it before jumping to any conclusions here.  [… and of course, with new COVID measures announced over the weekend, all of this could be somewhat premature too].

The return of inflation.

Inflationary pressures are increasingly starting to get mentioned.   With gas and electricity prices leaping, and rumours of £2 per litre petrol, all of this is going to have a significant impact on affordability.  Customers of course need to stay warm, and get to work as a priority, so this will start to feed through to arrears levels.  It seems we are going to have to be prepared and prepared soon (likely early in the new year).

The great resignation

Staffing and recruiting is still a burning issue for many companies, many appear to have large swaths of employees announcing they have found new roles. 

The question I have been mulling on is why is this occurring, and founds some plausible answers this week.

No one has moved roles for the last 18months, so we have a lot to catch up on –  it is just all happening in a shorter period of time.

Also, many older employees in the workforce have just decided to not come back.  With COVID, new younger employees have also not yet entered the workforce. With about 500,000 employees entering and leaving the workforce in the UK every year, this kind of made sense.

With the turn of the month to December, there are only a few more weeks to get things ready for the break over the holidays and then into the new year, so a few important things to think about this week.

Have a good week everyone.

This year I have forbidden myself from buying any mince pies until December. Those sweet, pastry-encrusted, treats are a particular weakness and one that retailers seem to attempt to tempt me with earlier each year – but far so good, I have remained strong – it is however a strong signal that the end of the year is starting to creep upon us.

There were two stories in particular that caught my eye his week

The first was the FCA proposal to ban debt packagers from earning referral fees. From my conversations this week, it did seem it was broadly welcomed by the industry. The FCA is clearly becoming increasingly assertive and proactive in its stance towards preventing customer harm… and, by joining the dots you have to wonder if this is a reflection and anticipation of future events impacting customers in the lending market.

The other story was what appeared to be a disagreement between Amazon and VISA, whereby Amazon gave notification to customers in the UK that VISA credit cards would no longer be accepted for payment from January 2022… all due to high transaction fees.

Now, this of course may all be positioning (the rates are not all that different) and an agreement will be thrashed out before then, but I was sat wondering if this was yet another symptom of the pandemic and attempts by companies to recover lost margin and revenue.

I have started to see similar behaviour in my own shopping basket recently. It does appear that inflationary pressures are building. Whilst interest rates have not increased in the UK yet, this is now widely expected. Combined with increased fuel cost it is all going to put increasing pressure on the poor consumer.

It is something we clearly need to think about and anticipate in our collections strategies and processes now… modelling these increased costs into affordability templates, working through the impacts on both lending and arrears volume, establishing options for customers.

I know we all really want this to be over, and sometimes if I close my eyes it feels as if it is ending… but headlines such as these could be pointing to it being just the end of the beginning… if the case, now the real work starts… getting ahead is going to be a priority.

So maybe not quite so cheery this week… time for a cup of tea, mince pie to get cracking tomorrow I think.