UK Consumer Credit Market Outlook: Q2 2009

Table of Contents

DATAMONITOR VIEW

CATALYST

SUMMARY

ANALYSIS

• The second quarter of 2009 saw a slight improvement in some credit products
  • The consumer credit market showed some signs of recovery in Q2 2009
  • There was negative year-on-year growth for all product lines in Q2 2009, but it was an improvement on Q1 2009
• Despite the Bank of England' s policies filtering through into the economy, lenders and borrowers remain reluctant to lend
  • It is unclear whether the Bank of England' s move to boost the amount set aside for quantitative easing will have the desired impact
  • Lenders' aversion to risk is leading them to lend predominantly to existing customers
  • Borrowers are cutting their reliance on credit in order to survive the downturn
• Datamonitor expects conditions in the credit market to pick up from 2010 onwards
  • Datamonitor' s forecasting model explained
  • GDP is expected to struggle in the remainder of 2009 before showing a moderate recovery in 2010
  • The Datamonitor scenario will see all credit products struggling in 2010 before returning to growth by 2011
  • Datamonitor has also considered two additional scenarios
• Regulatory bodies are looking at ways to improve conditions for consumers in the market
  • The Financial Services Consumer Panel wants the FSA to regulate consumer credit
  • The OFT has launched an investigation into high cost credit
  • The number of unsecured personal loan providers continues to fall

APPENDIX

• Supplementary data
• Definitions
  • Bank of England base rate
  • Balances outstanding
  • CAGR
  • CCJ
  • Consumer credit
  • Gross advances
  • OFT
  • Overdraft
• Methodology
• Forecasting methodology
  • Choice of economic variables
  • Model outputs
  • Bespoke scenario-based forecasting
• Further reading
• Ask the analyst
• Datamonitor consulting
• Disclaimer

TABLES

• Table: Quarterly total consumer credit gross advances and balances outstanding in the UK, Q2 2007 - Q2 2009
• Table: UK consumer credit gross advances by product, Q2 2007 to Q2 2009 (£m)
• Table: Datamonitor' s updated macroeconomic variables for 2008 - 13: Datamonitor scenario
• Table: Updated Datamonitor view consumer credit forecast by product line, 2008 - 13 (£ billion)
• Table: Datamonitor' s updated pessimistic consumer credit forecast by product line, 2008 - 13 (£ billion)
• Table: Datamonitor' s updated optimistic consumer credit forecast by product line, 2008 - 13 (£ billion)
• Table: UK consumer credit balances outstanding by product, Q2 2007 to Q2 2009 (£m)
• Table: Datamonitor' s updated macroeconomic variables for 2008 - 13: pessimistic scenario
• Table: Datamonitor' s updated macroeconomic variables for 2008 - 13: optimistic scenario

FIGURES

• Figure: Year-on-year outstanding balances were flat in Q2 2009 and gross advances fell by less than they did in Q1 2009
• Figure: The year-on-year rate of decline slowed for all product lines in Q2 2009
• Figure: More than three-quarters of consumers will not use credit to maintain their lifestyle given the economic downturn