UK Consumer Credit 2016: Forecasts and Future Opportunities

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Consumer credit lending in 2016 will rise by 7%, but growth will slow over the forecast period, with balances outstanding reaching £292.5bn in 2020. Consumer confidence will maintain current demand, despite the uncertainty caused by the UK’s vote to leave the EU in June 2016. Strong competition is increasing the availability of credit but also weakening credit scoring criteria; consequently, there are signs that credit quality is deteriorating. Accommodating monetary policy should mitigate increases in the cost of credit due to higher inflation.

Scope

Verdict Financial’s “UK Consumer Credit 2016: Forecasts and Future Opportunities” analyzes the UK consumer credit market, with coverage of both supply and demand factors as well as sectoral analysis. Specifically the report:

– Analyzes the relative performance of the major sectors of the UK consumer credit market.

– Reviews the drivers behind recent market performance.

– Identifies changes in market dynamics.

– Forecasts balances outstanding.

– Forecasts future drivers of growth and product features.

Reasons to Buy

Which factors will impact the supply of lending

Which factors will affect consumer demand for credit

Which sectors offer the best prospects and opportunities for expansion over the next few years

Zopa
Facebook
Google
Hitachi Capital
Amazon
Airbnb

Table of Contents

EXECUTIVE SUMMARY

The state of the UK consumer credit market

Prospects for niche sectors

Critical success factors

CONSUMER CREDIT GROSS ADVANCES AT A RECORD HIGH

Gross advances are estimated to climb to £292.5bn by 2020

Outstanding debt is continuing to rise

Early indications are that credit supply could start to tighten

The UK has seen four years of uninterrupted credit supply growth

The quality of new credit has deteriorated further over the last 12 months

Quarterly write-offs on credit card and other unsecured debt have resumed their decline following a spike in Q3 2015

The Financial Conduct Authority is implementing a more stringent regulatory regime

New techniques in credit assessment are unlikely to alter the supply of credit

Consumer demand for unsecured credit will be maintained

Credit providers report a rebound in demand

Consumer confidence dropped significantly but is starting to rebound

Consumer spending has rebounded, but sales of luxury items have declined

Looser lending criteria have been priced in

FUTURE PERFORMANCE WILL VARY SIGNIFICANTLY BY SECTOR

P2P lending will be the fastest-growing sector

Credit card lending will be driven by growing consumer confidence in online and mobile commerce as well changing spending habits

Overcapacity in the car market will reduce demand for motor finance

Competition and regulatory pressure will weigh on overdraft usage

Online spending and increased availability of POS finance will support growth

Marginal growth is forecasted for home credit

Payday lending will stabilize at a much reduced level

P2P lending will be the fastest-growing sector of consumer credit over the forecast period

APPENDIX

Abbreviations and acronyms

Definitions

Gross advances

Balances outstanding

Home credit

Payday loan

Methodology

Future Sentiment Index

Present Sentiment Index

Bibliography

Further reading

About Verdict Financial

Disclaimer

Table

Table 1: Consumer credit forecasts by product line (£m), 2016-20f

Figures

Figure 1: Unsecured gross advances will grow by 2-3% per year over the forecast period

Figure 2: Credit availability has been improving for several years

Figure 3: Looser lending criteria have contributed to worsening credit quality

Figure 4: Debt write-offs of other unsecured lending has reached a new low

Figure 5: There has been significant relaxation of credit scoring criteria over the last two quarters

Figure 6: Lenders are reporting stagnating demand

Figure 7: Consumer confidence plummeted towards the end of 2015

Figure 8: Retail sales are rebounding

Figure 9: Relaxation in credit scoring criteria appears to have been priced in

Figure 10: Unsecured consumer credit gross advances will total £292.5bn by 2020

Figure 11: Increased online spending will drive credit card growth over the next few years

Figure 12: Motor finance is set for a period of declining growth

Figure 13: Changing consumer preferences will drive reduced use of overdrafts

Figure 14: Retail finance will witness modest growth over the next few years

Figure 15: Home credit lending will grow at a marginal rate over the forecast period

Figure 16: Payday lending will be drastically reduced from its peak and is likely to remain so

Figure 17: Annual P2P lending will reach £3.4bn by 2020

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