Table of Contents
- CHAPTER 1 EXECUTIVE SUMMARY
- Introduction
- Sizing the UK non-standard population in 2005
- The non-standard population continues to decline
- Drivers behind the non-standard population
- Underlying macro-economic factors ultimately drive the non-standard
population
- A time lag exists between GDP and the non-standard population
- A recession typically takes longer to feed into mortgage arrears and
repossessions compared to unemployment and CCJs
- Unemployment trends feed directly into the non-standard market
- Interest rates play a pivotal role in driving the non-standard
population
- Mortgage arrears and repossessions are now rising
- The number of registered CCJs increased in 2005 for the first time
in fifteen years
- Personal bankruptcies hit a record high in 2005
- Social trends also play a key role in driving the non-standard
population
- According to Datamonitor estimations, just over two million
individuals were without a bank account in the UK in 2005
- Self-employment numbers have been increasing particularly strongly
in recent years
- The number of income support recipients has fallen
- Government initiatives to tackle financial exclusion
- Encouraging savings among disadvantaged households
- Offering alternative borrowing solutions for those in need
- Forecasting the non-standard population to 2010
- According to Datamonitor's neutral forecasting scenario, the
non-standard population will rise to 9.42 million by 2010
- Under the optimistic view of the UK economy, the non-standard
population falls to 8.67 million by 2010
- Under the pessimistic forecasting scenario, the non-standard
population grows to reach 9.87 million by 2010
- Conclusions
- CHAPTER 2 INTRODUCTION
- What is this report about?
- Who is the target reader?
- How do you use this report?
- CHAPTER 3 SIZING THE UK NON-STANDARD POPULATION IN 2005
- Introduction
- Defining the non-standard population
- Lending products: altering the dynamics of demand and supply
- Subjectivity is a necessary evil
- Alternative commonly used terms
- Sub-prime is a segment of non-standard
- Report coverage: age and affordability
- A bit of background behind financial exclusion in the UK
- Financial exclusion is a real problem for society
- Unscrupulous lenders compound this problem
- What factors have contrived to promote credit exclusion?
- Sizing the UK non-standard population
- The non-standard population continues to decline
- The non-standard population continues to decline despite the UK
population increasing
- Datamonitor's non-standard population sizing methodology
- Reasons for credit rejection
- Elimination of double counting
- Seven steps to size the UK non-standard population
- Any questions...
- A few factors account for the majority of the non-standard population
- Self-employment and CCJs on record were the largest contributors to
the non-standard population up to 2004
- Personal bankruptcies and repossessions on record contribute least
to the non-standard population
- Not having a bank account and claiming income support have increased
in importance compared to unemployment and mortgage arrears
- CHAPTER 4 DRIVERS BEHIND THE NON-STANDARD POPULATION
- Introduction
- Underlying macro-economic factors ultimately drive the non-standard
population
- A time lag exists between GDP and the non-standard population
- A recession typically takes longer to feed into mortgage arrears and
repossessions compared to unemployment and CCJs
- A household's repayment hierarchy helps to explain these variations
- Unemployment trends feed directly into the non-standard market
- Unemployment is now increasing
- How much has Gordon Brown's New Deal contributed to this situation?
- Interest rates play a pivotal role in driving the non-standard
population
- CCJs, mortgage arrears and repossessions typically track the base
rate
- Mortgage arrears and repossessions are now rising
- However, the number of properties carrying records of arrears or
reposessions continues to decline
- The number of CCJs registered increased in 2005 for the first time in
fifteen years
- Yet the number of CCJs on record declined further in 2005
- Personal bankruptcies hit record high
- The proportion of self-employed people filing for bankruptcy
continues to decline
- Despite the considerable increase, bankruptcy remains a weak driver
of the non-standard market
- Social trends also play a key role in driving the non-standard population
- The number of unbanked individuals has declined, helped, in part, by
the Universal Banking Services scheme
- According to Datamonitor estimations, just over two million
individuals were without a bank account in 2005 in the UK
- The size of the unbanked population has remained more or less stable
over the last five years
- There is an uneven social distribution of unbanked individuals
- Ipsos MORI provides further clarity on the distribution of unbanked
individuals
- The Government's Universal Banking Services initiative is aimed at
tackling the issue of the unbanked population
- There have been some problems with the implementation of this
initiative
- Some stakeholders have called on the banking industry to put more
effort into marketing basic bank accounts
- Yet the number of basic bank accounts is growing
- Nonetheless, Universal Banking Services will have a minimal impact
on the non-standard lending arena
- Self-employment levels continue to move slowly upwards
- Self-employment levels have had little impact on the decline in the
non-standard population
- However, self-employment numbers have been increasing particularly
strongly in recent years
- A number of factors have resulted in this impressive growth of
self-employment in recent years
- The number of income support recipients has fallen moderately
- Government initiatives to tackle financial exclusion
- Promoting financial literacy to tackle causes rather than consequences
- Community Finance and Learning Initiative
- The FSA proposed a new strategy for financial literacy
- The banking community calls for the inclusion of financial literacy
lessons in the National Curriculum
- Encouraging savings among disadvantaged households
- The Savings Gateway
- The Child Trust Fund: promoting savings from birth
- Offering alternative borrowing solutions for those in need
- The Social Fund is still struggling to reach those who need it most
- Credit unions offer another alternative to the private sector
- Assisting individuals encountering debt problems
- Citizens Advice reports that consumer debt problems have been
increasing strongly
- The Consumer Credit Counseling Service is also reporting growing
demand for debt advice
- The Government's initiatives aimed at improving consumer debt advice
services
- CHAPTER 5 FORECASTING THE NON-STANDARD POPULATION TO 2010
- Introduction
- Forecasting the non-standard population to 2010
- Datamonitor's forecasting methodology explained
- Forecasting macro-economic drivers
- Forecasting social drivers and the impact of Government initiatives
and regulatory change
- According to Datamonitor's neutral forecasting scenario, the
non-standard population will rise to 9.42 million by 2010
- The non-standard population will increase gradually over the next
five years
- Under the optimistic scenario, the non-standard population will drop
to 8.67 million by 2010
- The non-standard population falls to 8.67 million by 2010
- Under a pessimistic scenario the non-standard population will reach
9.87 million by 2010
- The non-standard population grows to reach 9.87 million by 2010
- CHAPTER 6 CONCLUSIONS
- The non-standard population reached a turning point in 2005
- But what will this mean for non-standard lenders?
- CHAPTER 7 APPENDIX
- Supplementary data
- Data tables relating to Chapter 3: Sizing the UK Non-standard
Population in 2005
- Data tables relating to Chapter 4: Drivers Behind the Non-standard
Population
- Data tables relating to Chapter 5: Forecasting the UK Non-standard
Population to 2010
- Definitions
- AAGR
- Balances outstanding
- CAGR
- Exclusive distribution
- Gross advances
- Installment credit
- Mail order
- Personal Loans (PoS)
- Retail finance
- Store cards
- Unsecured personal loan
- Research methodology
- Relevant readings
- Future readings
- Relevant links
- Datamonitor's custom research capabilities
- The Retail Banking team
- List of Tables
- Table 1: Income support claimants, 2001-2005
- Table 2: Number of people defined as non-standard compared to standard
population, 2001-2005e
- Table 3: Drivers of the non-standard population, 2001-2005e
- Table 4: Number of mortgage repossessions and arrears, 2000-2005
- Table 5: Major factors that account for the existence of unbanked
individuals
- Table 6: Income support claimants, 2001-2005
- Table 7: Forecasted macroeconomic and social drivers behind the size
of the non-standard population - Datamonitor's neutral scenario,
2005e-2010f
- Table 8: Forecasted performance of the non-standard population's
drivers under the optimistic scenario, 2005e-2010
- Table 9: Forecasted performance of the non-standard population's
drivers under pessimistic scenario, 2005e-2010f
- Table 10: UK non-standard population, 2001-2005e
- Table 11: Indexed drivers behind the size of non-standard population,
1990-2004e
- Table 12: Total UK ILO unemployed and those claiming unemployment
benefits, 1996-2005e
- Table 13: UK employment by industry, 1996-2005
- Table 14: Bank of England base rates, 1996-2005
- Table 15: Indexed base rate, CCJs, repossessions and mortgage arrears,
1996-2005
- Table 16: Number of arrears and repossession on record, 1995-2004
- Table 17: Number of CCJs registered, satisfied and cancelled, 1996-2005
- Table 18: Number of CCJs registered and on record, 1986-2005
- Table 19: Number of bankruptcies in England and Wales, 1996-2005e
- Table 20: Number of bankruptcies by employment, 2001-2005e
- Table 21: Net number of basic bank accounts opened, April
2003-December 2005
- Table 22: Percentage of UK adult population without a current or
savings account by employment status, 2005
- Table 23: Percentage of UK adult population without a current or
savings account by socio-economic group, 2005
- Table 24: Percentage of UK adults without a current or savings account
by age, 2005
- Table 25: Number of self-employed, 1996-2005
- Table 26: Self-employment and proportion of all in employment by
gender, 2001-2005
- Table 27: Income Support claimants by duration of current claim,
2001-2005
- Table 28: ILO unemployed by age groups, indexed 1996=100, 1996-2005
- Table 29: UK Non-standard population forecasts according to
Datamonitor's neutral scenario, 2005e-2010f
- Table 30: UK Non-standard population forecasts according to
Datamonitor's optimistic scenario, 2005e-2010f
- Table 31: UK Non-standard population forecasts according to
Datamonitor's pessimistic scenario, 2005e-2010f
- List of Figures
- Figure 1: The UK non-standard population continues to decline, falling
to an estimated 9.1 million in 2005, 2001-2005e
- Figure 2: There was a large time lag between the trough in GDP and the
corresponding peak in the non-standard population following the last
recession, 1990-2005e
- Figure 3: A recession takes time to filter through to unemployment,
CCJs, mortgage arrears and repossessions, 1990-2005e
- Figure 4: ILO unemployment has increased for the first time since
2002, 2001-2005e
- Figure 5: Interest rates remain at historically low levels, 1996-2005
- Figure 6: The number of properties with mortgage problems declined
steadily until 2005, 1990-2005
- Figure 7: While declining for fifteen years, the number of CCJs
registered increased in 2005, 1996-2005
- Figure 8: As the economy recovered from the last recession, personal
bankruptcies declined. However, this trend reversed in 1999 and personal
bankruptcies have been increasing ever since, 1996-2005e
- Figure 9: Not only has the self-employed population increased, but
also the percentage of the workforce that is self-employed, 2001-2005
- Figure 10: According to Datamonitor's neutral forecast, the
non-standard population will gradually increase to 9.42 million by 2010,
2005e-2010f
- Figure 11: Datamonitor covers the non-standard and sub-prime lending
market in 2006 with a suite of three published reports
- Figure 12: Datamonitor's definition of non-standard
- Figure 13: A certain degree of subjectivity is needed in a definition
of the non-standard population because some mainstream lenders are
inevitably willing to accept greater risk than others
- Figure 14: Common terms used to refer to the circumstance defined by
Datamonitor as "non-standard"
- Figure 15: Sub-prime consumers represent a segment of the non-standard
population
- Figure 16: The UK non-standard population continues to decline,
falling to an estimated 9.1 million in 2005, 2001-2005e
- Figure 17: The proportion of people defined as non-standard has fallen
over the past five years, 2001-2005e
- Figure 18: Ordinal ranking of non-standard drivers highlights long
term dominance of self-employment, 1996-2005e
- Figure 19: There was a large time lag between the trough in GDP and
the corresponding peak in the non-standard population following the last
recession, 1990-2005e
- Figure 20: A recession takes time to filter through to unemployment,
CCJs, mortgage arrears and repossessions, 1990-2005e
- Figure 21: A simplified example of a household's repayment hierarchy
helps to explain why CCJs resulting from consumer credit defaults peak
before mortgage arrears and repossessions
- Figure 22: ILO unemployment has increased for the first time since
2002, 2001-2005e
- Figure 23: Both ILO unemployment and unemployment claimant count have
decreased over the last ten years, 1996-2005
- Figure 24: While the actual number of unemployed 16-17 year olds is
relatively small, it has been rising quicker than other categories in
recent years, 1995-2005
- Figure 25: Interest rates remain at historically low levels, 1996-2005
- Figure 26: Up until 2004, falling base rates were mirrored by
declining repossessions, mortgage arrears and CCJs, 1996-2005
- Figure 27: Unlike personal loans and credit cards, mortgage interest
rates closely mirror the Bank of England's base rate, Jan-01 - Dec-05
- Figure 28: The number of properties with mortgage problems declined
steadily until 2005, 1990-2005
- Figure 29: Arrears and repossessions on record have declined from
their peak in the mid 1990s, 1996-2005
- Figure 30: After fifteen years of decline, the number of CCJs
registered increased in 2005, 1996-2005
- Figure 31: More than 1.8 million CCJs were registered in 1991 leading
to a peak in CCJs on record in 1995 of almost 8.5 million
- Figure 32: As the economy recovered from the last recession, personal
bankruptcies declined. However, this trend reversed in 1999 and personal
bankruptcies have gradually increased ever since, 1996-2005e
- Figure 33: The proportion of self-employed people filing for
bankruptcy has declined while the proportion of employed and unemployed
people filing for bankruptcy has increased, 2001 & 2005e
- Figure 34: The unemployed, students and housewives are the most likely
groups to be unbanked, 2005
- Figure 35: DE individuals are by far the most likely socio-economic
group not to have a current or savings account, 2005
- Figure 36: Younger individuals and the elderly are more likely to be
unbanked than other age groups, 2005
- Figure 37: Since April 2003, a net of 1,639,884 basic bank accounts
have been opened, April 2003-December 2005
- Figure 38: The number of people self-employed has remained relatively
flat over the last decade, although self-employment has risen rapidly in
more recent years, 1996-2005
- Figure 39: Not only has the self-employed population increased, but
also the percentage of the workforce that is self-employed, 2001-2005
- Figure 40: Long-term claimants account for the bulk of income support,
2001-2005
- Figure 41: According to Datamonitor's neutral scenario, performance of
the key drivers will result in increasing the size of the non-standard
population over the next five years, 2001-2010f
- Figure 42: According to Datamonitor's neutral forecast, the
non-standard population will gradually increase to 9.42 million by 2010,
2005e-2010f
- Figure 43: Under the optimistic scenario the performance of key
drivers will have a negative impact on the size of the non-standard
population in the UK over the next five years, 2001-2010f
- Figure 44: Under a more optimistic scenario, the non-standard
population in the UK is forecasted to fall to 8.67 million by 2010,
2005e-2010f
- Figure 45: Under the pessimistic scenario, difficult economic
conditions and a weakening labor market will result in an increasing
number of non-standard individuals, 2001-2010f
- Figure 46: According to Datamonitor's pessimistic scenario, the UK
non-standard population is forecasted to reach 9.87 million by 2010,
2005-2010f
- Figure 47: Datamonitor's core consulting capabilities
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