Hi, I'd also really recommend giving Zylkene a go as I have used it on my cat for over grooming and other stressful situations like trips to the vets & fireworks.
There is also something called Homeopet 'Anxiety' drops which are a homeopathic remedy and when I used it in conjunction with the Zylkene I have seen AMAZING results.

A bit of a money saving tip if you do decide to give Zylkene a go - buy the higher dose capsules and just use a very small portion at a time. I get the 225mg and one capsule will last for about 2 days at 3 doses a day. It's really inexpensive when you consider that a pack of 10 will last about 3 weeks and the Homeopet drops last about 4. Both are completely non-toxic and harmless so you cannot overdose your cat on it.

You can buy both items from the VioVet website which is much cheaper than eBay. I think it works out at about £15 every 3-4 weeks but as it should only take a month or two to get him to break the cycle it's much cheaper than vet consultations/prescriptions!

I think that making him wear the collar and shutting him outside would only make the problem worse and as long as the condition isn't life threatening then let him over groom as this is his way of calming/soothing himself.

If you really can't afford to buy some then I could send you a couple capsules that I have got left over as mine are not in need of it any more

Hi! Wow, our cat has almost EXACTLY the same problem.

I've been researching how to get her to stop, and I'll tell you what I've found.

First, I'll describe what is going on with my girl to give you an idea of how our problems are similar:

We have two cats, sisters from the same litter, with Munchie being the dominant cat. About a year and a half ago, we moved house and shortly thereafter she started acting a little depressed and stopped playing and moped about, looking sad. She then started licking herself and within a couple of months had progressed to self-mutilation to the point where she had terrible oozing sores on her lower abdomen and the backs of her legs. Attempts to treat the sores with creams, etc., simply caused her to lick off the cream or ointment, and enforce the behavior. We ended up having to keep an Elizabethian collar on her to stop the bleeding, after taking her to the vet several times, without resolution. As with your cat, she finds the collar frustrating. I have started her on clicker training to provide enrichment (both are indoor cats), and when I start training, I take off the collar. She is fine as long as I am working with her, but after she eats, she grooms (of course), and then invariably ends up overgrooming her abdomen and legs. At this point, we have to put the collar back on to prevent her from licking herself raw. Does this seem similar to what you are experiencing?

The possible causes I have found are:

Food Allergies:

Some cats develop a food allergy to the food they have been given over a long period of time. While they did not start out having a problems with FoodX, they end up with the allergy after long exposure.

Resolution: To eliminate food allergies as a cause for overgrooming, I have read recommendations to try an elimination diet. With this type of diet, you must feed your cat on food he has never had before, for two months.
The difficulty with elimination diets is that food allergies often include allergies to grains, and almost all dry foods contain some kind of grain or grain meal (corn meal, etc.). Even ultra-premium foods such as Science Diet and Iams have corn meal as the first or second ingredient. Check the ingredients list. There ARE dry foods such as EVO that are grain free, but usually these are REALLY expensive. As an alternative, you could try switching to an all wet food diet, which I've seen touted as being much better for your cat anyway, since they are carnivores. In this case, your cat would probably benefit from regular toothbrushing, since an all wet diet seems to lead to issues with tooth decay.

Litter allergies:

Some cats are allergic to clay based litters, or ones that produce dust. This includes the clumping litters (which are really easy to clean, so that's a bummer). I don't know if these kind of allergies can develop in the same way as a food allergy. It seems more likely that you would see manifestation of this kind of an allergy if you switched from a different kind of litter, and the allergy showed up with the new litter (IMO).

Resolution:

Do a trial on a dust free, clay free litter. I know there are some biodegradable ones out there, which fall into this category. Also, if you went biodegradable, it would facilitate potty training, if you were interested in teaching your cat to use the toilet (which, incidentally, saves a lot of money on litter, esp. if you use pet store litter, as I do).

Medical issues:

I don't really know enough about this category to comment.

Resolution:

See your vet to eliminate this as a possibility.

Psychogenic alopecia:

This is commonly called 'overgrooming', and results from stress. The stress can be any of a number of things, including moving (I think this started my girl on overgrooming), addition or subtraction of a family member (e.g. new baby or university bound family member, respectively), boredom, or even simply re-arranging your furniture. Psychogenic alopecia seems to be very difficult to diagnose, and I believe is usually diagnosed by eliminating all the other possibilities.

Here is a decent overview of Psychogenic alopecia:

Overgrooming (psychogenic alopecia) in Cats - Causes & Treatment of Psychogenic Alopecia | Cat Care Articles

Resolution:

This condition is very difficult to resolve. Apparently, the cat responds to a stressor by beginning overgrooming, and over time, because of the release of endorphins the process brings about, becomes a habit which is very difficult to break. If you can determine the cause of the cat's stress, you can attempt to reduce or eliminate the stressor (for example, if the cat is reacting to neighbor cats going through the backyard - known as territory invasion - you can pull the blinds, or get cat repellant sprays to apply to your yard - or fix the hole in the fence, whatever).

I have read that sometimes it is necessary to put the cat on medication, such as was recommended by other posters, to break the cat out of the habit. You will have to take the collar off, medicate, and watch your cat in your best attempt to distract him if you see him starting to fixate on the area he overgrooms. I have read over and over that cats do not respond to scolding or punishment, so I guess you should try to avoid this. It sometimes works for me to simply ask Munchie to 'please stop doing that' in a normal tone of voice. It's difficult though, because I think any response that her overgrooming elicits from me simply reinforces the efficacy of overgrooming as a tool for attention-getting. Also, she can be quite contrary, and if she knows I don't want her to chew the potted palm, she thinks it is so deliciously fantastic to do just that.

I would be very interested to know if you find a resolution to your problem, and am wishing you the very best of luck.

Okay, so I only just now noticed that your post was from a long time ago. Sorry to bother you, but did you ever get anywhere with your cat's overgrooming?

Please post if you did! I would be really grateful!