The UK Consumer Credit Market in 2006 and Future Outlook (Market Focus)

Published by: Datamonitor

Published: Mar. 29, 2007 - 39 Pages

Table of Contents

DATAMONITOR VIEW

CATALYST

SUMMARY

ANALYSIS

The consumer credit market delivered a poor performance in 2006

Advances dropped once again, though balances grew by a small degree

A number of factors can be attributed to the consumer credit market's poor performance

Despite a well performing UK economy in 2006, the consumer credit market did not follow suit

Successive base rate rises had a slowing effect on borrowing over 2006

Despite full employment, unemployment increased slightly over 2006, contributing to the consumer credit market's contraction

Though the housing market outperformed expectations in 2006, the consumer credit market still faltered

Further analysis highlighted that most individual product lines performed badly over 2006

In terms of balances outstanding, most products contracted except for retail finance and personal loans

Fluctuations in the share of the total consumer credit market show personal loans to have gained significantly

In terms of gross advances, all consumer credit products contracted except for overdrafts

Fluctuations in performance saw credit cards and overdrafts gain more share of the total consumer credit market

Meanwhile, point of sale finance continued to struggle

Motor finance had another poor year in 2006

Retail finance also had another poor year in 2006

What's next for the consumer credit market?

Datamonitor's forecasting model assesses the relationship of macroeconomic factors with respect to consumer credit products

Under the neutral view, new lending in the consumer credit market falls in 2007 and picks up thereafter

The consumer credit market will reach £229.4 billion in 2011

In terms of individual product lines, virtually all products will suffer in 2007 but will pick up thereafter

Under a pessimistic view of the economy, the consumer credit market will contract significantly in 2007 before picking up again in 2008

The consumer credit market will dip to a low of £199.8 billion in 2007 under a pessimistic scenario

In terms of individual product lines, retail and motor finance both continue their decline, with overdrafts performing best of all

Under an optimistic view of the economy, the consumer credit market will begin prospering again

The consumer credit market will expand at an annual average rate of 3.0 per cent to reach £238.1 billion in 2011

In terms of individual product lines, retail finance will be the only underperforming product

APPENDIX

Supplementary data

Methodology

Forecasting methodology

Choice of economic variables

Model outputs

Bespoke scenario based forecasting

Definitions

General definitions

Bank of England base rate

Balances outstanding

CAGR

Consumer credit

Gross advances

Overdraft

Definitions of point of sale motor and retail finance products

Motor finance products available at the point of sale

Retail finance products available at the point of sale

Further reading

European consumer credit reports

UK consumer credit reports

UK consumer credit briefings

Forthcoming consumer credit briefings

Relevant links

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Balances outstanding and gross advances in the consumer credit market, 2002-2006

Table 2: Consumer credit balances outstanding by product, 2002-2006

Table 3: Market share of consumer credit balances outstanding by product line, 2002-2006

Table 4: Consumer credit gross advances split by product, 2002-2006

Table 5: Market share of gross advances in the consumer credit market by product line, 2002-2006

Table 6: New and used car POS motor finance balances outstanding, 2002-2006

Table 7: New and used car POS motor finance gross advances, 2002-2006

Table 8: New car finance gross advances by product line, 2002-2006

Table 9: Used car finance gross advances by product line, 2002-2006

Table 10: Retail finance balances outstanding by product line, 2002-2006

Table 11: Retail finance gross advances by product line, 2002-2006

Table 12: Forecast performance of the consumer credit market drivers under the neutral scenario, 2005-2011f

Table 13: Consumer credit forecasts under a neutral view of the economy, 2006-2011f

Table 14: Forecast performance of the consumer credit market drivers under the pessimistic scenario, 2005-2011f

Table 15: Consumer credit forecasts under a pessimistic view of the economy, 2006-2011f

Table 16: Forecast performance of the consumer credit market drivers under the optimistic scenario, 2005-2011f

Table 17: Consumer credit forecasts under an optimistic view of the economy, 2006-2011f

Table 18: 12 month year-on-year change in UK house prices, January 2002-December 2006

List of Figures

Figure 1: Advances dropped by 4.5 per cent in 2006, though balances grew by a small amount, 2002-2006

Figure 2: Consumer confidence continued to fall through 2006, May 2004 -December 2006

Figure 3: The housing market performed significantly above expectations in 2006, January 2002-December 2006

Figure 4: Unsecured personal loans experienced the strongest growth over the last five years, 2002-2006

Figure 5: Unsecured personal loans have gained an extra share of 6.8 per cent in the last five years while credit cards, motor and retail finance have all lost share, 2002-2006

Figure 6: Except for overdrafts, new lending on all consumer credit products suffered from a poor performance in 2006, 2002-2006

Figure 7: Credit cards and overdrafts have gained share while unsecured personal loans have lost share, 2002-2006

Figure 8: The share of used car finance within the motor finance market declined slightly in 2006, 2002-2006

Figure 9: Gross lending in both the new and used car finance markets declined in 2006, 2002-2006

Figure 10: Reversing the trend somewhat, two of three retail finance product lines saw growth in balances outstanding over 2006, 2002-2006

Figure 11: Gross advances for all product lines within retail finance have followed a downward trend since 2004, 2002-2006

Figure 12: The consumer credit market will steadily increase and reach £229.4 billion in 2011f, 2006-2011f

Figure 13: Under the pessimistic scenario, the consumer credit market will drop to a low of £199.8 billion in gross advances in 2007, 2006-2011f

Figure 14: Under an optimistic view of the economy, the consumer credit market will grow very strongly over the next five years, 2006-2011f

Figure 15: Point of sale product aggregations used within this briefing

Abstract

Introduction

Following a muted performance in 2005, the consumer credit market delivered a worse performance in 2006. Indeed, after more than a decade of strong growth, the consumer credit market has now slowed. Moreover, the majority of individual product lines performed badly over the year. So what's in store for the consumer credit market over the next five years?

Scope

• Covers unsecured personal loans, credit cards, overdrafts, motor finance and retail finance in the UK.
• Provides forecasts under 3 different scenarios for the consumer credit market as a whole as well as for individual product lines.
• Examines the factors that have impacted on the consumer credit market over the course of 2006, as well as the previous four years.

Highlights

Constrained by various factors such as a weaker labor market, increasing consumer debts and low consumer confidence, gross lending amounted to £207.8 billion at the end of December 2006, representing a contraction of 4.5 per cent on the 2005 level (£217.5 billion). Unsecured personal loans and credit cards remain the dominant products in the consumer credit market in terms of balances outstanding. However, credit cards lost share over 2006 as a result of its poor performance and its share now stands at 26.2 per cent, while personal loans continued to gain market share, standing now at 56.6 per cent. Though the consumer credit market suffered over 2006, it has nevertheless seen significant growth over the last decade. Yet motor and retail finance have been exceptions to the rule, with both product lines slowly losing market share to direct lending. Indeed, over the last few years a number of leading financiers have exited the POS market.

Reasons to Purchase

• Gain access to the latest market sizing and forecasting data for the consumer credit market to place your performance in context to the market's.
• Understand how the market is changing and evaluate any opportunities for your business arising from these changes.
• Plan your future strategy with confidence using Datamonitor's scenario based forecasts of UK residential gross advances to 2011.

Please note, this file is delivered as a Zip file.

Get Full Details About This Report >>

About MarketResearch.com
MarketResearch.com is an online aggregator selling over 160,000 market research reports, company profiles and country profiles from over 600 research firms. Our reports will provide you with the critical business and competitive intelligence you need for strategic planning and marketing research. Coverage includes the US, UK, Europe, Asia and global markets.