Clarity is in short supply. Especially when it comes to understanding the likely trajectory of arrears over the coming months. Positions vary from the unashamedly confident to looks of horror as lenders contemplate the months ahead.

In truth, the reality is never as good as anyone hopes and never as bad as they fear. But there are reasons not to be too cheerful on the subject.

Full employment has been the de facto reason for confidence in the face of the cost-of-living crisis and the pressure on borrowers’ purses.

There has been a drip feed recently of job loss news from TaTa Steel to WeWork to PWC. All these companies are for different reasons looking to lay off staff in order to meet a reduced need for services in the market. Business costs have risen and for the first time since the global financial crisis (GFC), companies are now looking to address their outgoings.

In its latest global report, Allianz Trade anticipates that business insolvencies in the UK will hover around 30% above pre-pandemic levels by 2025, with notable peaks expected in 2024 (29,850 cases) and 2025 (28,400 cases).

There are rumours that arrears are growing not only when people have come off their product terms but now even when they are still within their current fixed term, such has been the impact of the cost-of-living crisis.

We really do not know how long inflation is likely to be with us, but with oil at over $90 per barrel the inflationary impact of events in the Middle East may yet still feed into further price pressure and inflation. Higher rates for longer will make it more difficult for borrowers to meet their current and future commitments.

The pandemic has changed everything. Many across the generations have lost their confidence and ability to be self-sufficient. Brutal things still happen to people.

Life changing events and the subsequent decisions and action plans that are required to support them can take a toll on people on the front-line. Companies must be mindful that they not only have the vulnerable customers to worry about but also the staff that deal with them as well as regulatory and reputational issues that follow from getting the first two of these wrong.  Being ready for the increase in vulnerability, its different forms and degrees, is a strategic imperative.

Unlike the last bout of arrears post the GFC, the expectations of lenders from policy makers and regulators could not be more different. Consumer Duty considerations, new notions of vulnerability and firms’ behaviour will place an expectation on lenders that they understand what a good outcome means at a very granular level.

Simply lengthening a term, changing a rate or applying special measures will not be sufficient if in three months or three years’ time the borrower is further disadvantaged by a poorly advised decision or product.

All these factors are coalescing to make a quick obvious solution feel further away than ever. There are various solutions – not least of which is to have expertise and capacity on standby. Which ever pathway you take, and take one you must, make sure you have the right guide.

Simon Collingridge is managing director UK at Fortrum