Economic Uncertainty Must Refocus Attention to Collections Activities

31 January 2019

At the time of writing, Teresa May has just lost the vote on her terms of the withdrawal from the EU in the House of Commons and so is going back to Brussels to see if there is any more room for negotiation. If unsuccessful in negotiations, if we are to Brexit, it looks like a ‘no deal’ could be the most likely outcome.

The uncertainty around Brexit appears to be already affecting the UK economy. Jaguar Land Rover has just announced 4,500 job losses and in its announcement of this news stated Brexit as one of the reasons for this. Ford quickly followed suit with predicted cuts of over 1,000 UK workers. But are others likely to follow?

The government’s own figures estimate a slowdown in the UK economy of approximately 10% in the event of a no deal Brexit. UK Revenue and Customs report 217,000 UK businesses trade with the EU and of these, 145,000 trade ONLY with the EU.

With the effect of Brexit being such an unknown quantity, lenders and servicers should probably be considering worst case scenarios. With last year’s interest rate rise, many companies will have stress tested their books and looked at longer term predictions for arrears performance. There is software in the market that can assist with modelling varying economic scenarios, both regionally and nationally, and these projections along with modelling varying house price performance scenarios should allow the creation of some very specific “what if” collections strategies.

With those that have servicing platforms that encompass arrears and special servicing activities (or that integrate with third party software that delivers this functionality), now is the time to re-test any automated activities provided to ensure that the “cradle to grave” collections process is as efficient as it can be. Collections staff should only deal with cases by exception – a servicing system should do all the monitoring against required policy and only put cases on work queues that break an expected event.

It looks like Q1 2019 could affect our industry’s performance for the foreseeable future. Of course, originations, arrears management and funding will all be affected however Brexit pans out. If there are to be winners it will be those that have proactively planned ahead and have built contingency into their strategic plans. Our industry will undoubtedly ride whatever waves Brexit generates and push on as positively as possible as it always does, with a customer centric focus being core to all activities.

Media contact

Debbie Staveley
Director and Owner,
bClear Communications

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+44 (0)1275 542 511

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