CATALYST 1
SUMMARY 1
ANALYSIS 2
In Q3 2009, consumer credit gross lending fell below the level seen in the first quarter of the year 2
The third quarter of 2009 wiped out the partial recovery in lending seen in Q2 2009 2
Most consumer credit lines saw smaller year-on-year declines in Q3 2009 4
The Bank of England's measures appear to have staved off a more severe downturn, although the economy remains subdued 7
Concerns remain that the Bank of England's quantitative easing program is storing up problems for the future 7
A sharp spike in credit card write-offs is likely to have a dampening effect on the overall level of consumer lending 8
Borrowers are taking advantage of the low base rate to pay off their debt 8
Datamonitor expects flat conditions in the consumer credit markets in 2010 before they pick up strongly in 2011 8
Datamonitor's forecasting model explained 8
GDP is set to recover slowly in 2010 before beginning to pick up in 2011 9
The outlook for unemployment looks better than previously forecast 9
The Bank of England's base rate has been unchanged since March 2009 9
Retail sales and new car registrations grew as consumers looked to take advantage of rates before VAT is raised again 10
House prices are experiencing slow growth 10
The Datamonitor scenario will see all credit products remaining flat or declining further in 2010 before recovering in 2011 11
Datamonitor has also considered two additional scenarios 13
The pessimistic scenario assumes that the economy will suffer a double-dip recession 13
The optimistic scenario assumes a more pronounced economic recovery 14
The UK government is cracking down on consumer credit products that it considers to be 'unfair' 14
The Department for Business Innovation and Skills is looking to make credit card borrowing 'fairer' 14
The government's financial services bill announced a clampdown on unsolicited credit card cheques 15
The government is set to ban logbook loans 15
APPENDIX 16
Supplementary data 16
Definitions 17
Bank of England base rate 17
Balances outstanding 17
CAGR 17
CCJ 17
Consumer credit 17
Gross advances 18
OFT 18
Overdraft 18
Methodology 18
Forecasting methodology 18
Choice of economic variables 18
Model outputs 19
Bespoke scenario-based forecasting 19
Further reading 19
Ask the analyst 19
Datamonitor consulting 19
Disclaimer 19
List of Tables
Table 1: Quarterly total consumer credit gross advances and balances outstanding in the UK, Q3 2007 to Q3 2009 3
Table 2: UK consumer credit gross advances by product, Q3 2007 to Q3 2009 (£m) 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 (£ billion) 12
Table 5: Datamonitor's updated pessimistic consumer credit forecast by product line, 2008-13 (£ billion) 13
Table 6: Datamonitor's updated optimistic consumer credit forecast by product line, 2008-13 (£ billion) 14
Table 7: UK consumer credit balances outstanding by product, Q3 2007 to Q3 2009 (£m) 16
Table 8: Datamonitor's updated macroeconomic variables for 2008-13: pessimistic scenario 16
Table 9: Datamonitor's updated macroeconomic variables for 2008-13: optimistic scenario 17
List of Figures
Figure 1: In Q3, gross lending continued to fall on a yearly basis, while yearly growth in balances outstanding was also in negative territory 3
Figure 2: All product lines saw year-on-year decreases in Q3 2009, although overdraft lending saw a small decline 5