Daily Research News Online no. 2855 - UK Financial Services Outlook

UK Financial Services Outlook

January 15 2004

British consumers have reduced their expectations regarding saving and borrowing activities over the past few months, according to Martin Hamblin GfK and John Gilbert Associates' Financial Activity Bulletin.

The Bulletin uses the same survey as the monthly consumer confidence survey, undertaken by Martin Hamblin GfK for The European Commission. Consumers are asked about their expected savings, investment and borrowing activities in the next six months and this is linked to their main financial services providers and to underlying consumer confidence. Over the past year it has proved an accurate indicator, particularly for the housing market and the strength of mortgage / remortgage demand, where other commentators have slipped up by predicting a downturn.

Life and pension companies may see falling demand in the first quarter of 2004, with only 20% of consumers expecting to make regular life premium contributions - down from 27% in September. The proportion of people intending to make regular pension contributions is slightly down on September.

Demand for unsecured credit is expected to fall, although demand for car financing plans will remain steady. 30% of consumers intend to repay debt, a similar proportion to September, although slightly less than the 33% in December 2002.

There is better news for investment businesses and mortgage providers. Consumers are expecting to invest more in stocks and bonds, either directly or through collective investment vehicles, reflecting the improved state of the market. However, overall intentions to take out an ISA have fallen since September, dropping from 30% of adults to 27%. The demand for ISAs is down most among younger people, where household budgets may be under most pressure.

There is little change in expected mortgage and remortgage activity despite mortgage rate rises in November. The proportion of people intending to put down a deposit on a property is slightly lower than the very strong September figure, although it remains higher than last December. This measure has been a good indicator of the trend in house prices during 2003.

A summary of planned activity over the last five quarterly surveys is shown below. Patterns of seasonal activity may emerge as the series grows over time.

Base: 1,990 people aged 16+
	Dec-02	Mar-03	Jun-03	Sep-03	Dec-03
	%	%	%	%	%
Overall activity	80.8	81.6	77.8	79.6	79.2
Savings/investment activity	66	68.9	65.3	68.9	65.3
Borrowing activity	24	26.2	21	20.7	19.3
Debt repayment	33.7	33	28.7	29.9	29.8
House purchase intentions	8	8.2	8.8	9.5	9

The Bulletin also asks consumers about their main financial services provider. The survey found that the top nine banks and Nationwide dominate personal financial services with a market share of 84% of consumers.

Lloyds TSB is the main personal financial services provider for 18.3% of respondents, up from 16.5% in September, and has the largest share in this respect. The increase coincides with heavy advertising of its current account. The best performing brands in terms of market share during 2003 have been Halifax (+3%), Barclays (+2.5%), and Alliance & Leicester (+2.1%).

Report producer John Gilbert comments: 'Consumer trust and confidence in the long term savings industry is not helped by the high profile brand names who have been fined in the selling of Precipice bonds and the continued under-performance of endowment and with-profits policies. Such concern is likely to be reflected in a drop in new regular life business in the coming months. The relative strength of the housing market in the past few years is partly the result of many more people investing in property due to the very poor performance of traditional long-term savings vehicles and their lack of transparency. Little change in the strength of housing market sentiment is expected in the near term'.

The Financial Activity Bulletin contrasts consumer intentions with subsequent reality, reviews quarterly changes in market share in relation to advertising and marketing campaigns, and provides a growing database of trend data enabling segmentation analysis. The Bulletin costs £950 per annum and is produced in electronic format four times a year. Further details are available from Ruth Ramm at Martin Hamblin GfK, ruth.ramm@martin-hamblingfk.co.uk

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