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TELECOMS INDUSTRY
REPORTS
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Retail financial services market 2008
03/04/08
The 25th
Financial Activity Survey commissioned by financial research
specialist JGFR from GfK NOP shows little change on the record low
intended activity in last quarter’s survey.
This suggests the trading outlook for retail financial services
businesses in the coming months is set to remain depressed, hit by a
combination of weak demand and, increasingly, constrained product
supply.
This quarter’s survey does however show an improvement on the New
Year quarter with the proportion of people expecting to undertake
one or more of 18 specified savings, investment or borrowing
activities up from 67% in December to 73% in March – although down
on 75% a year ago and below the 6 year average of 78%.
The intensity of activity, although up on last quarter, from some
23.7 million to 25.3 million adults expecting to undertake 2 or more
activities, is down on 26.6 million in March 2007, in turn some 5
million lower than in March 2006 (31.5 million).
More people intend to save/invest than in December – up from 58 % to
63%, although down from 67% a year ago. A similar picture is in
borrowing with the proportion of intending borrowers up from 14% to
18%, although there is little change in borrowing expectations
compared to a year ago.
A feature of the past year has been the improvement in household
finances as people avoid/reduce debt and become more cautious over
spending. Following a drop in debt repayment intentions for the past
three quarters, in line with a fall in borrowing activity, this
quarter debt repayment intentions have picked up again. Of the
estimated 10.5 million people intending to undertake only one
activity 2 million (19%) expect only to repay debt.
Three of the four main FAB indices (based on a 2-quarter moving
average to offset seasonal influences - Q3/Q4 2002=100) improved on
the quarter, although all indices are down on a year ago.
The overall FAB Activity Index rose from 87.5 to 88.3 (Spring 2007
92.4)
The FAB Savings/Investment Activity Index slipped to 91.7 from 92.5
last quarter and from 98.7 a year ago
The FAB Borrowing Activity Index rose to 68.3 (67.4 last quarter,
74, a year ago)
The FAB Debt Repayment Index rose to 78.1 (73.2,84.4)
Across the eighteen activities covered in the survey, most saw a
rise compared to the very weak New Year survey.
Rising cash deposit intentions set to trigger strong institutional
competition
The most popular activity is placing a cash deposit (36% of adults).
More people intend to deposit cash, up from 34% last quarter and
little changed on a year ago. Fewer people (30%) expect to
contribute to an ISA in the coming months compared to a year ago
(34%).
Overall net life and pensions demand (35%) is down compared to a
year ago (40%), while investor sentiment is close to its 2003 lows,
although there are relatively few sellers in prospect. Demand for
government or corporate bonds is slightly below a year ago.
Gloomy consumer credit outlook apart from small improvement in car
finance demand
The outlook remains gloomy for the consumer credit industry,
particularly credit card, overdraft and personal loan borrowing.
Overall 10% of adults expect to borrow by unsecured credit, down
slightly year-on-year. The one slightly brighter spot is demand for
car finance, this picked up from its December low, although its
index (70) is well down on March 2007 (78) and remains historically
low.
But a rise in housing market indicators…from a weak base
For the first time since last June, both housing market indicators
point to increasing activity. The mortgage index rose to 74.9, up
from 66.7 in December and its highest since last June while the
property purchase intentions index rose to 87.1 from 85.4, although
well down on March 2007 (98.8). In London demand for mortgages rose
sharply – the London Mortgage Index rose to its highest (114.5)
since December 2005, while property purchase intentions, although up
on the quarter were insufficient to prevent the London Property
Purchase Intentions Index (160.8) falling to its lowest since
December 2006
Remortgage intentions will have boosted the former, while the spring
buying season may attract hopeful bargain hunters.
Big regional differences in demand – South West and Wales set to be
most financially active
Regional differences in financial activity are very apparent.
Highest levels of activity are found in the South West (79%) and
Wales (78%), with the lowest in Yorkshire/Humberside (64%).
Commenting on the survey findings John Gilbert, Managing Partner of
JGFR said:
‘The combination of very weak consumer confidence and financial
well-being are reflected in the continuing depressed savings,
investment and borrowing intentions. This will intensify the
difficulties of financial businesses generating revenue growth,
particularly when one of the few bright spots is in mortgage demand
where supply is being withdrawn. There is a growing possibility of a
liquidity squeeze on consumers with many people cast adrift in
unchartered waters and becoming forced asset sellers’
Notes:
The 25th Financial Activity Survey was undertaken by GfK NOP for
JGFR among 2,007 adults aged 16+, representative of the UK
population, between 7–16 March.
The survey is housed on the same GfK NOP omnibus as is the March UK
Consumer Confidence Survey carried out for The European Commission.
Nick Gibson, editor
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