If you collect debts in the UK, today’s jobs numbers are a warning light: when unemployment rises and wage growth slows, arrears usually follow. And with credit card borrowing costs hitting fresh highs, the “can’t pay” segment can grow fast.
What happened
1. UK unemployment rose to 5.2% in Q4 2025, the highest since early 2021.
2. Youth unemployment (18 to 24) reached 14%, a 5-year high and described as a joint 10-year high excluding the pandemic period.
3. Pay growth slowed, and the market reaction was immediate: traders increased expectations that the Bank of England could cut rates in March, with money markets pointing to around a 75% chance of a cut to 3.5%.
4. Separately, the average credit card purchase APR was reported at 35.8% in February, the highest since records began in June 2006.
Why debt collectors should care
More job insecurity pushes more households into “priority bills first” behaviour (rent, council tax, utilities), leaving less for unsecured credit and discretionary repayments.
Slower wage growth reduces the ability to stabilise repayment plans, even for people still in work.
Youth unemployment matters because younger borrowers often have thinner savings buffers, higher rent exposure, and are more likely to rely on overdrafts, BNPL, and credit cards.
High card APRs are the accelerant: balances grow faster, minimum payments bite harder, and a small, missed payment can snowball into a delinquency cycle.
What to watch next
1. Payment plan performance
Expect a higher rate of “plan breaks” (missed instalments) and a bigger spread between prime and subprime outcomes.
2. Hardship and vulnerability signals
Job loss, reduced hours, and “in between roles” stories will show up more. Train agents to identify vulnerability and triage early, not at month 3.
3. Creditor strategy shift if rates fall
If rate-cut expectations strengthen, some lenders may adjust settlement appetite and pre-legal strategies. The key is timing: borrowers feel relief last, not first.
Practical playbook for collectors
1. Move earlier on engagement, not escalation
* Day 1 to 7: multi-channel nudges focused on options, not threats.
* Day 8 to 21: structured affordability conversation, with a clear “repay, pause, or evidence” decision.
2. Tighten affordability capture
Ask for simple, consistent inputs:
* Employment status change in last 90 days
* Housing cost trend (up, flat, down)
* Priority arrears (yes or no)
Then use that to route: maintain plan, reduce plan, short pause, or specialist support.
3. Offer shorter “stabilisation plans”
In a weakening labour market, 30 to 60 day stabilisation plans can outperform long plans that fail quickly. The goal is re-engagement and habit, then reassess.
4. Refresh tone and scripting for youth borrowers
If 18 to 24 unemployment is rising, rewrite scripts for:
* Smaller, more frequent payments
* App-based self-serve options
* Clear signposting to free debt advice early (to protect outcomes and reduce complaints)
5. For B2B collections: tighten credit control triggers
When macro pressure rises, do not wait for 60+ days past due to act.
* Confirm PO and dispute status early
* Re-issue statements faster
* Escalate “silent” accounts earlier, because silence often precedes insolvency risk
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