UK Consumer Credit Market Outlook: Q1 2009

Table of Contents

DATAMONITOR VIEW

• CATALYST
• SUMMARY

ANALYSIS

• The reduction in consumer credit slowed in the first quarter of 2009
  • The consumer credit market declined for the fifth consecutive period in Q1 2009
  • The rate of decline seen across unsecured personal loans and motor finance slowed in Q1 2009
• Despite drastic moves by the Bank of England, lenders and borrowers are shying away from credit products
  • The Bank of England has moved towards a policy of quantitative easing
  • Lenders continue to pursue conservative strategies as the prevailing economic conditions remain difficult
  • Consumers are becoming more aware of the need to organize their finances
• Datamonitor expects conditions to remain tough during 2009 before improving in 2010
  • Datamonitor' s forecasting model explained
  • Further falls in GDP and soaring unemployment show that the UK economy remains in turmoil
  • Under the Datamonitor scenario, all credit products will have a difficult 2009
  • Datamonitor has also considered two additional scenarios
• The government is introducing new measures to regulate the consumer credit market
  • The government is looking to prevent the unsolicited raising of credit card limits
  • The OFT is conducting a review on the fairness of competition in the consumer credit market
  • Consumers are turning to loan sharks in desperation as the credit crunch continues to bite

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, Q1 2007 to Q1 2009
• Table: UK consumer credit gross advances by product, Q1 2007 to Q1 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, Q1 2007 to Q1 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: Both gross advances and balances outstanding continued to decline on a year-on-year basis
• Figure: All products experienced negative year-on-year growth in Q1 2009
• Figure: The rate of interest paid for a loan of £5,000 grew by 44% over two years
• Figure: The majority of respondents said they plan to save more in the future