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UK Savings Turn Corner
After five stagnant years, household savings and investments in the UK are set to increase by 40% from just over £1,300 billion to £1,840 billion by 2008, according to a new report by Datamonitor. However, UK consumers are currently confused by the sheer number of options and providers.
Total growth of UK household savings and investments slowed to an average of 3% per annum during 1998-2003, and holdings in stocks and shares, which attract large investments after deposits, fell by 25% during 2001-2002, prompting consumer flight to safety in cash-based deposits. However, the latter half of 2003 has seen a revival in consumer sentiment, according to the report, 'UK Savings and Investment'.
High profile mis-selling verdicts on household banks by the FSA have not helped confidence in the sector. According to Datamonitor, this helped boost deposit balances by nearly 20% between 2001 and 2003. Deposits, which stood at £708 billion in 2003, accounted for 54% of total UK household savings and investments compared to 43% in 1998.
Over the period 1998-2003, the strongest growth rate has been in household investments in unit trusts and OEICs (open-ended investment companies). According to Datamonitor, these have grown at 11% per annum to £132 billion in 2003, compared to 7.9% for consumer deposits over the same period. This is because unit trusts & OEICs offer consumers access to a diversified portfolio, actively managed by professionals. Datamonitor expects funds managed by unit trust & OEIC managers to nearly double by 2008.
At present, UK consumers find the sheer number of investment products and providers confusing, according to Vikram Sehgal, financial services analyst at Datamonitor and author of the report. Nearly 130 business groups (14.5% down on the 1998 figure) offer more than 1,900 different funds in the UK, and the top ten groups, by funds under management, only account for a third of the market. This has prompted a number of unit trust and OEIC managers, such as M&G, to invest in advertising and educational campaigns across the UK. 'Campaigns display leadership by top managers' says Sehgal. 'Having established a relationship through education, it is they who will benefit from this changing tide'.
There were some cases of consolidation and restructuring activities within the market during 2003 and these are expected to continue in the future. Datamonitor expects the UK market eventually to consist of a few global players complemented by a few niche specialists.
Datamonitor's web site is at www.datamonitor.com
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