UK Consumer Credit Market Outlook: Q2 2009

DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
The second quarter of 2009 saw a slight improvement in some credit products 2
The consumer credit market showed some signs of recovery in Q2 2009 2
There was negative year-on-year growth for all product lines in Q2 2009, but it was an improvement on Q1 2009 4
Despite the Bank of England's policies filtering through into the economy, lenders and borrowers remain reluctant to lend 7
It is unclear whether the Bank of England's move to boost the amount set aside for quantitative easing will have the desired impact 7
Lenders' aversion to risk is leading them to lend predominantly to existing customers 8
Borrowers are cutting their reliance on credit in order to survive the downturn 8
Datamonitor expects conditions in the credit market to pick up from 2010 onwards 9
Datamonitor's forecasting model explained 9
GDP is expected to struggle in the remainder of 2009 before showing a moderate recovery in 2010 10
Unemployment continues to rise as the economic turmoil feeds through the economy 10
The Bank of England has maintained an historically low base rate 10
Retail sales grew but new car registrations and used car sales dropped 11
House prices are showing signs of leveling out 11
The Datamonitor scenario will see all credit products struggling in 2010 before returning to growth by 2011 12
Datamonitor has also considered two additional scenarios 13
Under the pessimistic scenario, there will be a potential double-dip recession 13
Under the optimistic scenario, the recovery would be more pronounced 14
Regulatory bodies are looking at ways to improve conditions for consumers in the market 15
The Financial Services Consumer Panel wants the FSA to regulate consumer credit 15
The OFT has launched an investigation into high cost credit 15
The number of unsecured personal loan providers continues to fall 16
APPENDIX 17
Supplementary data 17
Definitions 18
Bank of England base rate 18
Balances outstanding 18
CAGR 18
CCJ 18
Consumer credit 18
Gross advances 18
OFT 19
Overdraft 19
Methodology 19
Forecasting methodology 19
Choice of economic variables 19
Model outputs 20
Bespoke scenario-based forecasting 20
Further reading 20
Ask the analyst 20
Datamonitor consulting 20
Disclaimer 20
List of Tables
Table 1: Quarterly total consumer credit gross advances and balances outstanding in the UK, Q2 2007-Q2 2009 3
Table 2: UK consumer credit gross advances by product, Q2 2007 to Q2 2009 (úm) 6
Table 3: Datamonitor's updated macroeconomic variables for 2008-13: Datamonitor scenario 11
Table 4: Updated Datamonitor view consumer credit forecast by product line, 2008-13 (ú billion) 13
Table 5: Datamonitor's updated pessimistic consumer credit forecast by product line, 2008-13 (ú billion) 14
Table 6: Datamonitor's updated optimistic consumer credit forecast by product line, 2008-13 (ú billion) 15
Table 7: UK consumer credit balances outstanding by product, Q2 2007 to Q2 2009 (úm) 17
Table 8: Datamonitor's updated macroeconomic variables for 2008-13: pessimistic scenario 17
Table 9: Datamonitor's updated macroeconomic variables for 2008-13: optimistic scenario 18
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 3
Figure 2: The year-on-year rate of decline slowed for all product lines in Q2 2009 5
Figure 3: More than three-quarters of consumers will not use credit to maintain their lifestyle given the economic downturn 9