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UK Consumer Credit Market Outlook: Q3 2008

Published by: Datamonitor

Published: Dec. 23, 2008 - 17 Pages


Table of Contents


DATAMONITOR VIEW
CATALYST
SUMMARY
ANALYSIS
Year-on-year the consumer credit market fell away in 2008, with lending remaining weak
The consumer credit market performed poorly in 2008
Most credit products saw moderate growth in gross lending during the first three quarters of 2008
The fallout from the liquidity crisis had a big impact on credit products during 2008
Inflationary pressures constrained base rate cuts during the first three quarters of 2008
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
Datamonitor expects conditions to deteriorate further during 2009 before improving in 2010
Datamonitor's forecasting model explained
Negative GDP growth and the falling housing market herald tough times for the economy
Falling inflation allowed the Bank of England to cut its base rate
Retail sales showed some stability but car sales plummeted
House prices continued on their downward trajectory
Under its neutral scenario, Datamonitor predicts that all product lines will have a difficult 2009
Datamonitor has analyzed two additional scenarios
Measures are being taken by the government and other bodies to aid the consumer credit market
New lending panel created to monitor loans to households and businesses
The government's proposed tie-up between Lloyds TSB and HBOS will create a UK banking giant
Under the Consumer Credit Act, fixed-sum credit agreements will require annual statements
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
List of Tables
Table 1: Quarterly total consumer credit gross advances and balances outstanding in the UK, Q3 2006-Q3 2008
Table 2: UK consumer credit gross advances by product, Q3 2006-Q3 2008 (£m)
Table 3: Datamonitor's updated macroeconomic variables for 2007-12: neutral scenario
Table 4: Datamonitor's updated neutral consumer credit forecast by product line, 2007-12 (£bn)
Table 5: Datamonitor's updated pessimistic consumer credit forecast by product line, 2007-12 (£bn)
Table 6: Datamonitor's updated optimistic consumer credit forecast by product line, 2007-12 (£bn)
Table 7: UK consumer credit balances outstanding by product, Q3 2006-Q3 2008 (£m)
Table 8: Datamonitor's updated macroeconomic variables for 2007-12: pessimistic scenario
Table 9: Datamonitor's updated macroeconomic variables for 2007-12: optimistic scenario
List of Figures
Figure 1: Total consumer gross lending dropped off after Q4 2007 whereas balances outstanding saw strong growth
Figure 2: There was a moderate improvement for most products although unsecured personal loans saw large year-on-year percentage falls throughout 2008

Abstract

Introduction

The consumer credit market performed poorly in 2008 under testing economic conditions. In this latest edition of our quarterly Market Outlook Series, we discuss the latest market developments in the UK consumer credit market and provide our latest forecasts for the period 2008-12.

Scope
  • Provides the latest market sizing figures for the UK consumer credit market.
  • Covers different lines of consumer credit - credit cards, unsecured personal loans, overdrafts, retail finance and motor finance.
  • Considers the latest developments in the UK economy and uses these to build up three forecast scenarios for the next four years.
  • Includes an accompanying interactive Excel model.
Highlights

The consumer credit market saw performance weaken throughout the first three quarters of 2008 as the effects of the credit crunch saw a tightening of restrictions on the supply of credit making it more difficult for consumers to continue to borrow.

Encouraged by falling inflation late in the year, the Bank of England turned its focus to stimulating the economy and as a result it slashed interest rates during the last quarter of 2008. Having previously opposed a reduction in the rate, the members of the Monetary Policy Committee unanimously voted to lower rates.

In November 2008, the Chancellor of the Exchequer, Alistair Darling, announced the creation of a new banking bodythe Lending Panelwhich would monitor lending to households and businesses. The panel consists of diverse representatives from bodies such as regulators, banks, building societies, consumer groups the Bank of England and the Government.

Reasons to Purchase
  • Review market performance in Q3 2008 to place your own performance in context with the overall market
  • Use Datamonitor's market forecasts to plan your future strategy with confidence.
  • Understand how the ongoing liquidity crisis has affected lenders and the overall economy.
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