Outlook for UK Financial Services

UK consumer demand for financial services products is healthy, according to the latest Financial Activity Bulletin from Martin Hamblin GfK and John Gilbert Associates. The survey measures savings, investment and borrowing intentions.

Overall 21% of the population intends to borrow in the next six months, whether in the form of consumer credit or mortgages - up from 19% in December but well down on 26% last March. The latter fall is due to a decline in figures for consumer credit, while demand for mortgages has increased over the last year. The proportion of people intending to put down a deposit on a property to buy in the coming months is at its highest to date, ten percent.

One in three adults intends to repay or reduce ('pay down') debt, making it the top priority among the UK population, according to the FAB. Intention to do so is highest among 23-39 year olds (47%).

Life and pension contributions are set to hold fairly steady despite recent publicity over endowment mortgage mis-selling and the Penrose report into Equitable Life. The proportion of people intending to pay in on a regular basis to a life insurance company scheme rose from 20% to 25%, following a steep decline in December from 28% in September. This compares with 27% last March.

Demand for ISAs in the coming months is in line with the same period last year despite the introduction of regulations less favourable to them. The proportion of people intending to take out ISAs, either in a lump sum or in a regular savings scheme is 29%, up from 27% in December and little changed on March 2003. ISAs are the most popular savings or investment product among the over 65s (26% intend to take out an ISA).

Fewer people intend to deposit cash in the next 6 months - down three per cent to one third - but confidence in equities has recovered somewhat from a very weak position 12 months ago after the slump in world stock markets. 14% of adults intend to invest in equities either directly or through unit trusts compared with 15% in December but only 10% last March.

The nine quarterly surveys to date indicate that around 8 million adults in the UK are financially 'inactive' - c.20% of the population. Many of these people are elderly, says the Bulletin, and will depend on the State for their income. The most financially active people - defined as those people expecting to undertake six or more savings, investment or borrowing activities in the coming months - account for some 12% of the UK population, heavily concentrated in the South of England (39% of this group are found there).

The position of the top nine bank brands and Nationwide, measured in terms of whom people regard as their main financial provider, has slipped slightly to 82% from 87% in the last quarter, but is still up on the 78% recorded last March. Lloyds TSB remains top of the list with a share of 17.3%, down from 18.2% in December.

Repayment, borrowing and net repayment of debt (% of population), UK

Based on moving 6 monthly average of two consecutive quarterly readings starting with June/September 2002 and ending with December2003/March 2004

Analyst John Gilbert says the bulletin shows that 'consumers have not lost confidence in financial products and seem set to provide growing sales volumes of business for providers in the coming months. While the saving climate is much improved, with the rise in stock markets and increase in deposit rates providing better returns for investors from financial assets, many now prefer to channel their savings into more tangible forms of wealth aided by the ready availability of credit.

'The demand for housing and housing finance shows no signs of slowing with evidence this quarter of more young people about to enter the market, supported in some cases by family and friends, aware that the country will continue to face a major supply shortage of properties to buy for many years.'

The Financial Activity Bulletin is based on two questions added to Britbus, and uses responses from 2,000 people aged 16+ across the UK every March, June, September and December. Consumers are asked which of 16 categories of saving, investment or borrowing activity they are likely to undertake in the next six months and also which institution they regard as their main financial services provider.

Martin Hamblin GfK's web site is at www.martinhamblin-gfk.com

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas, 2024- by Nick Thomas, unless otherwise stated.

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