UK Personal Lending 2009: UK Consumer Credit Market in 2008 and Future Outlook

Table of Contents

DATAMONITOR VIEW

• CATALYST
• SUMMARY

ANALYSIS

• The consumer credit market deteriorated over 2008
  • The consumer credit market performed poorly in 2008, but although lending was weakened considerably, balances outstanding began to fall
  • Savings and investments declined in 2008 as consumers dip into their balances to pay off debt

• The credit crunch and recession continue to impede the functioning of the consumer credit market
  • Base rate cuts during 2008 have failed to help Britain climb out of recession
  • Lenders have become more conservative in order to cope with the economic downturn
  • Despite attempts to cut their spending, many consumers need to keep borrowing

• Most credit products saw modest falls in gross lending during 2008
  • Consumers continue to fund short-term borrowing needs with their credit cards
  • Unsecured personal loans declined dramatically over 2008
  • Gross advances on overdrafts have stayed relatively stable over 2008
  • The last quarter of 2008 saw a sharp decline in point of sale retail finance
  • Point of sale motor finance fell dramatically in the second half of 2008

• Personal loans have strengthened their market share over the past five years
• Economic conditions will continue to deteriorate in 2009 before improving in 2010
  • Datamonitor' s forecasting model explained
  • Difficult times will continue for the UK economy, with negative GDP growth and a falling housing market
  • 2009 will not herald respite from economic and financial difficulties, even under Datamonitor' s neutral scenario

• While the government is taking measures to aid the consumer credit market, any long-term shift requires changes in behavior on the part of the industry and consumers
  • A Lending Panel was created late in 2008 to monitor loans to households and businesses
  • Ultimately, sustainable consumer lending requires a responsible industry and more cautious consumers

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, Q4 2006 - Q4 2008
• Table: Retail savings and investments in the UK, 2004 - 08, £m
• Table: Net inflows of retail savings and investments, 2004 - Q3 2008
• Table: UK consumer credit gross advances by product, Q4 2006 - Q4 2008 (£m)
• Table: Market share of consumer credit balances outstanding by product line, 2004 - 08
• Table: Datamonitor' s updated macroeconomic variables for 2008 - 13: neutral scenario
• Table: Datamonitor' s updated neutral consumer credit forecast by product line, 2008 - 13 (£bn)
• Table: Datamonitor' s updated pessimistic consumer credit forecast by product line, 2008 - 13 (£bn)
• Table: Datamonitor' s updated optimistic consumer credit forecast by product line, 2008 - 13 (£bn)
• Table: UK consumer credit balances outstanding by product, Q4 2006 - Q4 2008 (£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: Total consumer gross lending slumped over 2008 and the rate of growth in balances outstanding started to decline in Q4 2008
• Figure: Savings and investments in the UK fell in 2008
• Figure: UK investors have pruned back their holdings in bonds, shares and mutual funds
• Figure: There have been declines for most products, although overdrafts saw relatively flat year-on-year growth throughout 2008
• Figure: Unsecured personal loans have continued to increase their market share of balances over the past five years