UK Consumer Credit Market Outlook: Q2 2009

• Provides the latest market sizing data for the UK consumer credit market.
• Covers an array of consumer credit lines - unsecured personal loans, credit cards, overdrafts, retail finance and motor finance.
• Uses the latest developments in the UK economy in order to build up three forecast scenarios that extend to 2013.
• Includes a complementary interactive Excel model.

• Review the market performance in Q2 2009 as a benchmark by which to evaluate your own performance.
• 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.

DATAMONITOR VIEW

CATALYST

SUMMARY

ANALYSIS

The second quarter of 2009 saw a slight improvement in some credit products

The consumer credit market showed some signs of recovery in Q2 2009

There was negative year-on-year growth for all product lines in Q2 2009, but it was an improvement on Q1 2009

Despite the Bank of England's policies filtering through into the economy, lenders and borrowers remain reluctant to lend

It is unclear whether the Bank of England's move to boost the amount set aside for quantitative easing will have the desired impact

Lenders' aversion to risk is leading them to lend predominantly to existing customers

Borrowers are cutting their reliance on credit in order to survive the downturn

Datamonitor expects conditions in the credit market to pick up from 2010 onwards

Datamonitor's forecasting model explained

GDP is expected to struggle in the remainder of 2009 before showing a moderate recovery in 2010

Unemployment continues to rise as the economic turmoil feeds through the economy

The Bank of England has maintained an historically low base rate

Retail sales grew but new car registrations and used car sales dropped

House prices are showing signs of leveling out

The Datamonitor scenario will see all credit products struggling in 2010 before returning to growth by 2011

Datamonitor has also considered two additional scenarios

Under the pessimistic scenario, there will be a potential double-dip recession

Under the optimistic scenario, the recovery would be more pronounced

Regulatory bodies are looking at ways to improve conditions for consumers in the market

The Financial Services Consumer Panel wants the FSA to regulate consumer credit

The OFT has launched an investigation into high cost credit

The number of unsecured personal loan providers continues to fall

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, Q2 2007-Q2 2009

Table 2: UK consumer credit gross advances by product, Q2 2007 to Q2 2009 (£m)

Table 3: Datamonitor's updated macroeconomic variables for 2008-13: Datamonitor scenario

Table 4: Updated Datamonitor view consumer credit forecast by product line, 2008-13 (£ billion)

Table 5: Datamonitor's updated pessimistic consumer credit forecast by product line, 2008-13 (£ billion)

Table 6: Datamonitor's updated optimistic consumer credit forecast by product line, 2008-13 (£ billion)

Table 7: UK consumer credit balances outstanding by product, Q2 2007 to Q2 2009 (£m)

Table 8: Datamonitor's updated macroeconomic variables for 2008-13: pessimistic scenario

Table 9: Datamonitor's updated macroeconomic variables for 2008-13: optimistic scenario

List of Figures

Figure 1: Year-on-year outstanding balances were flat in Q2 2009 and gross advances fell by less than they did in Q1 2009

Figure 2: The year-on-year rate of decline slowed for all product lines in Q2 2009

Figure 3: More than three-quarters of consumers will not use credit to maintain their lifestyle given the economic downturn