Exactly where the economy goes in the next few years depends on our choices both as citizens and consumers.
We’ve just chosen the Conservatives and they are busy implementing changes to balance the deficit. Then there are other factors that have to be counted, such as the effects of interest rate rises, continuing low inflation and the potential exit of the UK from the EU, which could impact the economy and financial markets in a variety of ways.
Despite the unknowns, it’s mostly good news for lenders at the moment, with many of the economic indicators looking very positive indeed.
Increased prosperity and consumer spending
On average, each of us in the UK is now doing as well financially as we were before the recession. As the economic outlook brightens, consumer prosperity and spending is also on the rise, which is great for the credit industry.
With increased consumer demand driving the economy forward, we need to make sure that consumers continue to have access to appropriate credit. Understanding consumers and helping them to access the most suitable financial products and services will help to maximise spending within the right affordability parameters.
A strong labour market and higher wages
A strong, stable labour market is a major indicator of a strengthening economy, and that’s what we have at the moment. Unemployment has continued on its downward march in recent months, which is improving the financial outlook for thousands of families and giving the economy a much needed cash injection.
As well as seeing more people in employment, wages are also increasing by 3% a year on average. Because interest rates remain very low, many consumers are finding themselves with more disposable income than they’ve had for a while, which will lead to sustained economic growth over the coming months and years.
What it all means for the credit market
Overall, the outlook for lenders is overwhelmingly positive. Unsecured lending is on the up, and that’s set to continue. What’s more, consumer confidence is high, income growth is strong and labour market conditions are sound. All this means that the economy should continue to grow strongly over the coming months and years, providing excellent opportunities both for lenders and the customers we serve.
Where there are unknowns in the economy, successful credit providers will see these as opportunities rather than threats.
While some of your customers might have been affected by the recent Budget changes, for example, there may be ways that you can reach out to help them with new products and services that meet their short-term financial needs.
Coupled with improving economic conditions, the industry is developing new technologies and data to minimise credit risk and support more personalised services for customers. By ensuring that products and services meet customers’ individual affordability requirements, these kinds of technologies can help lenders to build long, trust-based customer relationships, while achieving compliance with FCA requirements and minimising financial exposure.