A new report launched today forecasts the likely future demand for debt advice from the free-to-client advice sector based on two future predictions for the UK economy.
The report, produced by Dr John Gathergood, an economist at The University of Nottingham, warns that if independent forecasts are right and unemployment rises by more than two per cent in 2011, the demand for debt advice by the middle of next year will exceed that seen at the peak of the financial crisis.
The report, entitled Demand, Capacity and Need for Debt Advice in the UK was based on the extensive ONS Wealth and Assets Survey and supplemented by data from the free-to-client debt advice sector.
The report reveals that between 2008 and 2009, there was an increase of 350,000 individuals seeking free debt advice. In 2010, 1.4 million people have received advice from charities such as National Debtline, Citizens Advice and CCCS - one in every 33 UK adults.
The research also found that, at any given time, up to five million people report arrears on consumer credit, failure to keep up with mortgage payments, or that meeting credit commitments is a ‘heavy burden'. Of these, just one in six seek advice from any source.
Joanna Elson OBE, Chief Executive of the Money Advice Trust, which commissioned the research, said:
"The last few years have required debt advice charities like ours to bring about a step change in our capacity, not just to help people out of their immediate debt problems, but also to help them back into financial health with longer term planning.
"Should unemployment rise next year to the extent that independent forecasters predict, together with potential interest rate rises, we will face further challenges in meeting new demand. At the same time, with local council budgets being cut and debt advice funding through the Financial Inclusion Fund - targeted at the most vulnerable debtors - due to come to an end during next year, there may be new constraints on capacity.
"The research has also unearthed a challenge that exists already - namely that only one in six people with a debt problem seek advice. It is vital that anyone struggling with debts is able to make informed decisions and understand all of their options; the best way to do that is to seek advice from independent experts.
"The good news is that free, independent advice is available, and that the free-to-client advice sector has successfully developed to meet the huge growth in demand we have witnessed. Effective free, independent money advice is available from a range of organisations through a variety of different channels including face to face, telephone and online."
Dr Gathergood, an expert on credit, debt and borrowing in the Centre for Policy Evaluation in the School of Economics, said:
"Despite demand for debt advice currently being at near all-time high levels in the U.K., the scale of potential need for debt advice among households remains much greater than the level of advice currently sought.
"The report shows that the demand for debt advice is highly sensitive to the macro-economic environment, most specifically to unemployment rates and the cost of credit.
"Statistical analysis suggests that individuals with the greatest level of problem debts are more likely to seek advice, yet still the majority of consumers with problem debt do not. Socio-economic and demographic factors play a large role in determining whether an individual with problem debt chooses to seek advice."
