ISBN 1-85765-535-4

Table of Contents

Executive Summary

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TABLE OF CONTENTS

Executive Summary

Introduction

THE UK MARKET

Table 1.1: Gross Domestic Product at Constant 1990 Prices (£bn), 1991-1995

Table 1.2: Growth of UK Real Disposable Incomes at Constant 1991 Prices ( percent), 1991-1995

Table 1.3: Personal Income, Expenditure and Savings at Current Prices (£m not seasonally adjusted), 1991-1995

Table 1.4: Average Weekly Earnings of Full-Time Employees in Great Britain ( percent), 1991-1995

Table 1.5: Average Weekly Expenditure on Personal Finance Items for All Households in Great Britain (£), 1995

Table 1.6: Estimated Total Market in Great Britain for Personal Finance Expenditure and Savings (£m), 1995

Table 1.7: Forecast Consumer Spending and Real Disposable Incomes, (£m at 1995 prices), 1995-1997

Key Note Consumer Research

INVESTMENTS/SAVINGS BY CONSUMERS

TYPES OF INDEBTEDNESS

ATTITUDES TO FINANCIAL SERVICES

Table 2.1: Which, If Any, of the Following Do You Have? by Sex ( percent), 1994 and 1995

Table 2.2: Which, If Any, of the Following Do You Have? by Age ( percent), 1994 and 1995

Table 2.3: Which, If Any, of the Following Do You Have? by Social Class ( percent), 1994 and 1995

Table 2.4: Which, If Any, of the Following Do You Have? by Region ( percent), 1994 and 1995

Table 2.5: Which, If Any, of the Following Debts Do You Have? by Sex and Age ( percent), 1995

Table 2.6: Which, If Any of the Following Debts Do You Have? by Social Class and Region ( percent), 1995

Table 2.7: Which, If Any, of the Following Statements Do You Agree With? by Sex and Age ( percent), December 1995

Table 2.8: Which, If Any, of the Following Statements Do You Agree With? by Social Class and Region ( percent), December 1995

Stocks and Shares

INTRODUCTION

CONSUMER PROFILE

INDUSTRY SUPPLY

MARKET SIZE

RECENT DEVELOPMENTS

FUTURE PROSPECTS

Table 3.1: UK Share Ownership, 1979-1995

Table 3.2: Share Ownership Amongst Adults in Great Britain (000 and percent), 1991-1995

Table 3.3: UK Share Ownership by Sex, Age and Social Class ( percent of adults holding), 1993

Table 3.4: Ownership of Unit Trusts by Adults in Great Britain (000 and percent), 1991-1995

Table 3.5: Member Firms of the London Stock Exchange, 1986-1994

Table 3.6: UK Share Ownership by Type of Investor ( percent), 1995

Table 3.7: Main Media Advertising Expenditure on Investment Products (£000), 12 Months to September 1993-1995

Table 3.8: London Stock Exchange - Annual Turnover in UK and Irish Equities, 1990-1994

Table 3.9: London Stock Exchange - Annual Turnover in Foreign Equities, 1990-1994

Table 3.10: Breakdown of Total Turnover of Foreign Equities on the London Stock Exchange by Country ( percent), 1994

Table 3.11: London Stock Exchange - Turnover in Gilts (£m), 1990-1994

Table 3.12: Forecast Market Turnover - Total Business of All UK Exchanges (£bn), 1995-1999

Finance Houses

INTRODUCTION

CONSUMER PROFILE

INDUSTRY SUPPLY

MARKET SIZE

FUTURE PROSPECTS

Table 4.1: Adults Using Finance House Credit in Great Britain (000 and percent), 1994 and 1995

Table 4.2: Leading Finance Houses by Turnover and Ownership (£bn), 1993-1995

Table 4.3: UK Consumer Credit - New Business (£m), 12 Months to October 1994 and 1995

Table 4.4: Arrears Analysis ( percent of cases outstanding), October 1994 and 1995

Table 4.5: Main Media Advertising Expenditure by Credit and Loan Companies (£000), 12 Months to September 1993-1995

Table 4.6: New Consumer Finance Business (£m), 1992-1995

Table 4.7: Consumer Finance Outstandings (£m), October 1993-1995

Personal Insurance

INTRODUCTION

CONSUMER PROFILE

INDUSTRY SUPPLY

MARKET SIZE

RECENT DEVELOPMENTS

Table 5.1: Sources of Long-Term Business Premium Income ( percent), 1990-1994

Table 5.2: Insurance Taken Out by Adults in Great Britain ( percent), 12 Months to March 1994 and 1995

Table 5.3: Ownership of Car Insurance by Adults in Great Britain ( percent), 1994 and 1995

Table 5.4: Yearly Expenditure and Ownership of Insurance by Type ( percent of UK households and £ per year), 1991-1994

Table 5.5: Life Assurance Investments by Adults in Great Britain ( percent), 1994 and 1995

Table 5.6: Insurance of Home Property and Contents by Adults in Great Britain ( percent), 1994 and 1995

Table 5.7: Car Insurance by Adults in Great Britain ( percent), 1994 and 1995

Table 5.8: Private Health and Medical Insurance by Adults in Great Britain ( percent), 1994 and 1995

Table 5.9: Number of Authorised Insurance Companies and Employees in the UK, 1990-1994

Table 5.10: The UK's Top Ten Insurance Companies by Net Premium Income for General Insurance (£m), 1991-1994

Table 5.11: Leading UK Suppliers of Medical Insurance, Private Acute Care and Long-Term Care, 1994

Table 5.12: Main Media Advertising Expenditure by Insurance Companies (£000), 12 Months to September 1993-1995

Table 5.13: Premium Income and Life Insurance Policies in Force in the UK Market (£m and million), 1991-1995

Table 5.14: Life Insurance Benefits Paid to UK Policyholders (£m), 1990-1994

Table 5.15: UK Motor Insurance Premium Income and Underwriting Results for British Insurance Companies (£m), 1991-1995

Table 5.16: Motor Theft Claims for Private Cars by Number and Value (000 and £m), 1991-1995

Table 5.17: UK Domestic Property and Contents Insurance - Premium Income and the Value of Claims Incurred (£m), 1991-1995

Table 5.18: UK Private Medical Insurance - Subscriptions and Claims (000 and £m), 1991-1995

Table 5.19: Individual Permanent Health Insurance Policies and Premium Income (£m), 1991-1995

Pensions

INTRODUCTION

CUSTOMER PROFILE

INDUSTRY SUPPLY

MARKET SIZE AND TRENDS

RECENT DEVELOPMENTS

Table 6.1: Sources of Pension on Retirement in Great Britain ( percent of adults), 1994 and 1995

Table 6.2: Average Expenditure on Personal Pensions by UK Households (£ and percent), 1990-1994

Table 6.3: Ownership of Personal Pensions by Adults in Great Britain by Sex, Age, Social Class and Region ( percent), 1994 and 1995

Table 6.4: Sources of Individual Pensions Business ( percent), 1990-1994

Table 6.5: Main Media Advertising Expenditure by Leading Life and Pensions Providers (£000), 12 Months to September 1994 and 1995

Table 6.6: UK Individual Personal Pensions Policies in Force at Year End by Number, 1991-1995

Table 6.7: Personal Pensions New Business (000 and £m), 1991-1995

Table 6.8: Estimated Market Shares of Leading Personal Pensions Providers ( percent), 1995

Table 6.9: FSAVCs - Number of Policies and Premium Income (000 and £m), 1991-1995

Table 6.10: Occupational Pension Schemes, Total Premium Income (£m), 1991-1995

Plastic Cards

INTRODUCTION

CONSUMER PROFILE

INDUSTRY SUPPLY

MARKET SIZE

RECENT DEVELOPMENTS

FUTURE PROSPECTS

Table 7.1: Plastic Card Ownership (Singly or Jointly) by Adults in Great Britain ( percent), 1993-1995

Table 7.2: Ownership by Card Type in Great Britain ( percent of adults), 1994 and 1995

Table 7.3: Ownership of Barclaycard by Sex, Age, Social Class and Television Region ( percent of cardholders), 1994

Table 7.4: Frequency of Use of Credit or Charge Cards in Great Britain ( percent of adults), 1993-1995

Table 7.5: Fuel Purchases by Payment Method in Great Britain ( percent of adults), 1995

Table 7.6: Store Card Sales on Members of Retail Credit Group Accounts During the Third Quarter, 1991-1995

Table 7.7: Credit Card Versus Other Borrowing ( percent all adults), 1993-1995

Table 7.8: Major UK Banks Issuing Mastercard and Visa Credit Cards, 1994

Table 7.9: Examples of Charge Cards Issued by Some UK Banks, May 1995

Table 7.10: Examples of UK Affinity Cards, 1994

Table 7.11: Examples of UK Facility Cards, 1994

Table 7.12: UK Membership of Switch, August 1995

Table 7.13: UK Switch Activity, October 1988 (Start-Up)-June 1995

Table 7.14: Growth of UK Outlets for Visa, Mastercard and Switch (000), 1990-1994

Table 7.15: A Selection of Store Cards from Major UK Retailers, February 1995

Table 7.16: Main Media Advertising Expenditure on Credit and Charge Cards (£000), 12 Months to End of September 1995

Table 7.17: The UK Market for Plastic Cards by Number of Cards in Issue (000), 1991-1995

Table 7.18: The UK Market for Plastic Cards by Turnover (£m), 1991-1995

Table 7.19: Credit Card Borrowing via the UK Banks (£m), 1990-1994

Table 7.20: Mastercard and Visa Cash Advances as a percentage of Total Credit Card Turnover, (£m and percent), 1991-1995

Table 7.21: Total Plastic Card Fraud Losses in the UK (£m), 1990-1994

Table 7.22: Major Bank Issuers of Credit Cards in the UK (000), 1990-1994

Table 7.23: Cash Dispensers and ATMs in Major UK Banks and Building Societies, 1990-1994

Table 7.24: Forecast Ownership of Plastic Cards (000), 1995-2000

Table 7.25: Forecast Turnover of Plastic Cards at Current Prices (£m), 1995-2000

Banking

INTRODUCTION

CONSUMER PROFILE

INDUSTRY SUPPLY

MARKET SIZE

RECENT DEVELOPMENTS

Table 8.1: Income and Profitability of MBBGs (£bn), 1991-1994

Table 8.2: Adults With Bank Accounts in Great Britain by Type ( percent), 12 Months to March 1994 and 1995

Table 8.3: Current and Deposit Accounts' Opening Timescales by Adults in Great Britain ( percent opening), 1995

Table 8.4: Telephone Banking Services in Great Britain ( percent), 1994 and 1995

Table 8.5: Financial Services Products Purchased Through a Bank by Adults in Great Britain ( percent), 12 Months to March 1994 and 1995

Table 8.6: Payment and Cash Aquisition Volumes in Great Britain (billion), 1994

Table 8.7: Total Assets, Pre-Tax Profits and Capital Adequacy (risk/asset) Ratios of Leading UK Banks (£m), 1994

Table 8.8: Number of Personal Accounts for MBBGs (000), 1990-1994

Table 8.9: Number of Personal Deposit Accounts for MBBGs (000), 1990-1994

Table 8.10: MBBG's Non-Interest Income by Value (£m and percent), 1990-1994

Table 8.11: Total Assets and Pre-Tax Profits of the Other Major UK Banks (£m), 1990-1994

Table 8.12: Branch Outlets and Staff Levels for UK Banks, 1990-1994

Table 8.13: Top UK Planned Mergers in Banking Market Since Start of 1994

Table 8.14: Main Media Advertising Expenditure by Major UK Banks (£000), 12 Months to September 1994 and 1995

Table 8.15: Major British Banks Personal Sector Deposits and Lending by Value (£m), 1990-1994

Table 8.16: Profile of the Lloyds/TSB Merger

Building Societies

INTRODUCTION

CONSUMER PROFILE

INDUSTRY SUPPLY

MARKET SIZE AND TRENDS

RECENT DEVELOPMENTS

Table 9.1: Types and Source of Mortgages by Adults in Great Britain ( percent), 1993-1995

Table 9.2: Distribution of First Mortgages by Age, Status of Buyer, Mortgage Amount and Salary Earned ( percent), 1993 (Q3) and 1995 (Q2)

Table 9.3: National Trends in the UK Housing Market - Valuers Opinions ( percent), November 1995

Table 9.4: Topical Factors in the UK Housing Market ( percent), November 1995

Table 9.5: Building Society Current Account Holders in Great Britain (000 and percent), 12 Months to March 1995

Table 9.6: Building Society Current Account Holders by Sex, Age, Social Class and Region ( percent), November 1994 and December 1995

Table 9.7: Ownership of Building Society Savings and Investment Accounts in Great Britain ( percent of adults), 1994 and 1995

Table 9.8: Ownership of Plastic Cards Issued by Banks and Building Societies in Great Britain ( percent), 1994 and 1995

Table 9.9: Sourcing of BanK Assurance Products by Adults in Great Britain ( percent), 1994 and 1995

Table 9.10: Personal Loans from Building Societies and Banks by Adults in Great Britain ( percent), 1994 and 1995

Table 9.11: Progress of Building Societies in the UK, 1985-1995

Table 9.12: Total Employment in UK Building Societies, 1990-1994

Table 9.13: Main Media Advertising Expenditure by UK Building Societies (£000), 12 Months to September 1994 and 1995

Table 9.14: Building Society Mortgages Net New Commitments (£m), 1991-1995

Table 9.15: Loans by Building Societies to First-Time Buyers by Value and Volume, 1991-1995

Table 9.16: Personal Sector Liquid Assets and Balances Outstanding (£bn and percent), 1991-1995

Table 9.17: UK Building Societies Net Receipts (£m), 1991-1995

National Savings

INTRODUCTION

CUSTOMER PROFILE

MARKET SIZE AND TRENDS

Table 10.1: Adults in Great Britain with National Savings Accounts by Sex, Age, Social Class and Region ( percent), 1994 and 1995

Table 10.2: Ownership of National Savings Bank Investments by Type in Great Britain ( percent of adults), 1991-1995

Table 10.3: National Savings Bank - Value of Ordinary and Investment Accounts (£m), 1988-1995

Table 10.4: National Savings Balances Outstanding Versus Banks and Building Societies (£bn), 1991-1995

Further Sources

ASSOCIATIONS

PERIODICALS

DIRECTORIES

GENERAL SOURCES

HBI UK INFORMATION SOURCES

GOVERNMENT PUBLICATIONS

OTHER SOURCES

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EXECUTIVE SUMMARY

In 1995, real disposable incomes grew by less than consumer expenditure and the shortfall was funded out of personal savings, causing the savings ratio -- which measures personal savings as a percentage of personal disposable income -- to drop to 9.2 percent, its lowest level for 5 years. Looking ahead, Key Note is forecasting a slight improvement in the savings ratio to 9.9 percent in 1996 and 1997, and growth over the 2 years in personal disposable incomes at an average of 3 percent and consumer expenditure at an average of 2.5 percent.

Some £604bn worth of personal finance was transacted by UK consumers in 1995. It was borrowed, held in savings accounts, insurances, pensions or equities. The largest amount was held in savings and mortgages within building societies, banks and National Savings. Transactions in stocks and shares and credit cards were also significant, but in spite of all the attention focused on the need to make provision for old age, the amount spent on personal pensions came bottom of the list and was just one-sixth of the total of finance house credit.

In 1995, nearly 80 percent of adults in Great Britain had an interest-bearing current account at a bank or building society; 13 percent had a National Savings account and 15 percent owned shares. 21 percent said they had a personal pension and 26 percent a company pension. 7 percent owned a PEP and 5 percent some unit trusts. Credit card use was on the increase with 7 percent more adults having one in 1995 than did so a year earlier, and one in every four now has a debit card.

A mortgage is the most common form of debt with 34 percent of adults having one. 10 percent have a bank overdraft and a further 10 percent use credit purchase, which is more popular than hire purchase (7 percent). A surprisingly high 51 percent of adults claim to have no debts whatsoever and for those over 65 this increases to 91 percent. 37 percent of adults dislike carrying around a lot of cash, but only 12 percent use the cashback facility at a supermarket or other retailer. 30 percent have difficulty in saving and 28 percent believe their personal finances will improve over the next 12 months.

Share ownership, which peaked in 1991 at 11 million adults, declined in 1995 to an estimated 9.6 million. The London Stock Exchange is facing new competition from direct share dealing, alternative European exchanges and new Internet services. The value of securities traded is forecast to grow at around 4 percent per annum over the next 4 years, reaching £3.66bn in 1999, with performance in equities stronger than in gilts.

Consumer credit business in 1995 reached £18.3bn. Motor finance accounted for 41 percent, divided equally between new and used motors; retail was responsible for nearly 30 percent and there was strong growth in retail store card business. In 1995, unsecured direct personal finance boomed, increasing by nearly 44 percent over the previous year.

The insurance business is having a difficult time, as the sales of life insurance and pensions products decline, and as an industry, it strives to overcome a serious loss of trust suffered through mis-selling practices, and come to terms with new regulations imposed to prevent a recurrence. Total new long-term insurance income for 1995 is predicted to be the lowest since 1991 and many new direct insurers are entering the market creating intense price competition.

Pensions are fast becoming a political football as Government and Opposition try to solve the problem of a reducing workforce which needs to pay for an increasing number of longer-living pensioners. Against this background, the number of new personal pensions being sold and membership of occupational pensions schemes is falling. Already, some 35 percent of the workforce have no pension set aside for old age, and millions more are destined to live in poverty because they are not contributing enough to the pension they have for it to provide an income on which they will be able to live.

The plastic card market is very volatile with many new products and highly competitive interest rates. It is dominated by the major banks who, in spite of accounting for 87 percent of all the cards on issue, are having to hold their position in a frenetic market by waiving annual charges. The explosive growth of debit cards is rubbing off to the benefit of credit cards as consumers become more comfortable with all forms of plastic. In 1994, over 1.5 billion purchases were made on plastic, a figure which is expected to grow to 4 billion by the year 2000. In 1995, the value of turnover for all cards passed £80bn, of which credit cards accounted for 56 percent and debit cards 34 percent. By the year 2000, this is expected to rise to over £114bn, of which 38 percent will be for debit card transactions and 62 percent for all types of credit, charge and store cards.

The major UK banks have recovered from the poor profits of 2 years ago and in 1994 and 1995 they produced better results. In spite of collective profits totalling over £10bn, trading performance remains open to question and the improvement in profits seems more the result of reduced bad debt provisions than increased efficiency. Numbers of staff and of branches have reduced by 17 percent and 15 percent respectively and to compensate and protect customer services, the banks have increased investment in telephone banking and cash dispensers.

Building societies face declining growth of mortgage business and a savings market which is moving away from secure investments in favour of bonds and equities. A spate of mergers and planned conversions to PLCs has spawned a battle for customers to be fought on the relative merits of mutual versus corporate status; financial services being the ultimate target market for both camps. Mortgage business fell in 1995 against the previous year, but the share of personal sector liquid assets grew.

National Savings reported a good year in 1995 with savings balances outstanding at year-end increasing by an estimated 6 percent. Since 1991, National Savings has steadily increased its share of balances outstanding by 44 percent, which compares with 23 percent in building societies and 8 percent in banks. Pensioners' Bonds continue to be popular with more than 244,000 now held with a value of £2.2bn.

Text © 1996 Key Note

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