The UK Consumer Credit Market in 2007 and Future Outlook

The UK consumer credit market has continued to contract in 2007, as various issues such as the liquidity squeeze, high personal debt levels and weaker consumer spending power took their toll on the industry. With few signs of the current situation alleviating, the future of the UK consumer credit market still looks bleak.

Report Highlights
2007 saw liquidity issues affecting lending markets in the UK. While the impact of the credit crunch on personal lending markets is to a lesser extent than that witnessed in the mortgage market, it has contributed further to the subdued performance of the consumer credit sector.

Despite the economy recording a 2.9% and 3.1% GDP growth in 2006 and 2007 respectively, consumer credit has remained subdued in the previous two years. With the economy expected to slow down quite significantly this year, as the credit crunch takes its toll on the economy, the UK consumer credit sector is unlikely to recover in 2008.

After rising by just 4.4% over 200506, unsecured personal loan balances picked up again in 2007 with an increase of 9.7%.
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DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Feel Good Drinks was developed by ex-Coca-Cola colleagues who spotted a gap in the market for health drinks that were not 'boring' 2
The company has grown into a £6 million business, with international distribution 2
Feel Good Drinks are designed to reflect the corporate name by making consumers 'feel good' 3
The company uses only natural ingredients, with no 'bad' additives, while aiming to make its customers feel good 3
The Feel Good carbonates have a distinct 'better-for-you' positioning 3
The line up has been enhanced with 100% juice drinks, reflecting a move away from the declining carbonates market 4
The Feel Good ethos is also reflected by product packaging 4
New larger bottles, and four-packs, are designed to share the 'feelgoodness' with friends 4
Its bottles partly use recycled glass to appease the conscience of the consumer 4
Feel Good recently updated its online marketing to re-enforce the brand ethos with a new website and Facebook promotion 5
Feel Good's website has a home-made feel, featuring colorful 'cardboard' pullies and popups 5
The website encourages user involvement, with flavor voting forums, newsletter signups and a meet-the-team page 6
Feel Good's new Facebook promotion provides it with a unique way to connect with its target consumers 7
Feel Good embraced TV marketing for the first time in 2008, mirroring its online content with colorful, quirky ads 7
Feel Good further re-enforces its upbeat, positive brand ethos through countrywide events and charity partnerships 8
The 'Feelgoodmobile' travels UK parks and offices with free samples and product info 8
Feel Good employees are encouraged to donate work time to charity, aiding their 'feelgoodness' 8
Partnerships with charities further enhance Feel Good's ethical credentials 9
APPENDIX 10
Case study series 10
Methodology 10
Secondary sources 10
Further reading 10
Ask the analyst 10
Datamonitor consulting 11
Disclaimer 11
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Table 1: Consumer credit balances outstanding by product, 2003-07 (£m) 6
Table 2: Market share of consumer credit balances outstanding by product line, 2003-07 8
Table 3: Consumer credit gross advances split by product, 2003-07 (£m) 10
Table 4: Market share of consumer credit advances by product line, 2003-07 12
Table 5: New and used car POS motor finance balances outstanding, 2003-07 (£m) 13
Table 6: New and used car POS motor finance gross advances, 2003-07 (£m) 15
Table 7: New car finance gross advances by product line, 2003-07 (£m) 16
Table 8: Used car finance gross advances by product line, 2003-07 (£m) 16
Table 9: Retail finance balances outstanding by product line, 2003-07 (£m) 18
Table 10: Retail finance gross advances by product line, 2003-07 (£m) 20
Table 11: Consumer credit forecasts under a neutral view of the economy, 2007-12f (£m) 22
Table 12: Consumer credit forecasts under an optimistic view of the economy, 2007-12f (£m) 25
Table 13: Consumer credit forecasts under a pessimistic view of the economy, 2007-12f (£m) 28
Table 14: Nationwide's and Halifax's house price indices, May 2007-May 2008 30
Table 15: Forecast performance of the consumer credit market drivers under the Datamonitor view, 2007-12f 30
Table 16: Forecast performance of the consumer credit market drivers under the optimistic view, 2007-12f 31
Table 17: Forecast performance of the consumer credit market drivers under the pessimistic view, 2007-12f 31
Figure 1: Consumer credit gross lending in the UK market has continued to fall in 2007 whereas balances outstanding have continued to grow steadily 3
Figure 2: House prices have been falling in recent months 4
Figure 3: Unsecured personal loan balances rose by 10% over 2006-07 6
Figure 4: Unsecured personal loans has strengthened its market share of balances over the last five years 8
Figure 5: Gross advances for retail finance and unsecured personal loans fell in 2007 whereas the remaining product lines saw a growth 9
Figure 6: Credit cards cemented its share of consumer credit gross advances further in 2007 11
Figure 7: New car finance accounted for the majority of motor finance balances in 2007 13
Figure 8: Gross advances for both new car and used car finance rose in 2007 14
Figure 9: All product lines within retail finance saw a reduction in balances in 2007 18
Figure 10: Gross lending for all product lines of retail finance has been falling steadily 19
Figure 11: Under the Datamonitor view gross advances in the UK consumer credit sector will contract by 3.2% in 2008 21
Figure 12: Under the optimistic scenario the UK consumer credit sector will reach £247.0 billion in gross lending in 2012 24
Figure 13: Under the pessimistic scenario, the UK consumer credit market will grow at a CAGR of 0.4% over 2008-12 27
Figure 14: Point of sale product aggregations used within this briefing 33
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