2021
9
UK COVID-19 and Financial Services: A Year On Market Report 2021
2021-06-10T04:07:54+01:00
OX1050271
2195
139285
[{"name":"Financial Services","url":"https:\/\/store.mintel.com\/industries\/finance\/financial-services"}]
Report
en_GB
“COVID-19 has defined the financial services industry over the last year and its repercussions will shape developments in many markets in the years to come. While most consumers’ finances have…

UK COVID-19 and Financial Services: A Year On Market Report 2021

£ 2,195 (Excl.Tax)

Report Summary

The UK COVID-19 And Financial Services: A Year On market report identifies consumer attitudes towards spending priorities, financial wellbeing, future financial plans and COVID-19’S impact on Financial Services in the UK. This market report covers the market size, market forecast, market segmentation and industry trends for the Financial Services market in the UK. 

Current Market Landscape 

Due to COVID-19’s impact on Financial Services, periods of tight restrictions on personal and business activity have given people the time and the opportunity to consider issues that often get put off, such as finances.

  • 40% of consumers say they have thought about their finances more since the start of the outbreak.
  • 11% of consumers are thinking more about changing providers since the pandemic started, indicating low switch activity.
  • Lending fell by 20% in 2020 as consumers’ spending opportunities and demand for big-ticket purchases dropped.

Consumers have valued the reassurance of major brands’ heritage during the crisis, which is one reason why interest in switching has not risen further. The outbreak has allowed incumbent brands, particularly in retail banking, which has given them an opportunity to show that they can be relied upon to support their customers. Banks have done this the most successfully over the last year.

Future Market Trends in Breakfast Cereals 

Unsecured credit has been the hardest hit sector in consumer finance. Continued disruption would cause significant damage, while insurers would also come under further pressure from cautious consumers looking to cut their outgoings.

COVID-19 restrictions and hygiene concerns have seen consumers rely on online banking and contactless payments in the past year like never before. In both cases, the pandemic has accelerated existing trends. The success of the online-first approach will embolden banks to continue with plans for brand closures but also offer an opportunity to retain branch networks offering more interactive services such as advice and social spaces.

Read on to discover more details or take a look at all of our UK Financial Services market research.

Quickly understand

  • The impact of COVID-19 on key financial services sectors including secured and unsecured lending, savings and insurance, with five-year forecasts for these sectors. This includes projected performance for each of Mintel’s three COVID-19 disruption scenarios.
  • The impact of COVID-19 on macro-economic factors, financial wellbeing and consumer confidence.
  • The impact of COVID-19 on consumer behaviour, including spending priorities, lifestyles and future behaviour.
  • How consumers perceive different types of firms, including banks, building societies, specialist lenders and insurers, to have supported customers through the pandemic.
  • The impact of COVID-19 on financial behaviours, including how much people think about their finances.
  • The impact of COVID-19 on future financial plans, including online channel use and plans to save.

Covered in this report

Brands: Lloyds, Barclays, HSBC, Nationwide, Santander, Virgin Money,

Expert analysis from a specialist in the field

This report, written by Rich Shepherd, a leading analyst in the Financial Services sector, delivers in-depth commentary and analysis to highlight current trends and add expert context to the numbers.

COVID-19 has defined the financial services industry over the last year and its repercussions will shape developments in many markets in the years to come. While most consumers’ finances have remained relatively healthy and opportunities to spend have been heavily reduced, savings have soared. However, lending – particularly in consumer credit – has suffered in the aftermath of retail and hospitality closures. In the long term, the opportunity for online channels and contactless payments to take centre stage during the outbreak will have the biggest impacts on behaviour, while consumers also show a renewed interest in product research and getting the best deal.
Rich Shepherd
Associate Director, Financial Services

Table of Contents

  1. Overview

    • Key issues covered in this Report
    • COVID-19: market context
    • Economic and other assumptions
  2. Executive Summary

    • Impact of COVID-19 on financial services
      • Figure 1: Impact of COVID-19 on financial services, in short, medium and long term, 21 May 2021
    • The market
    • Mortgage lending fell by 9% amid COVID-19 restrictions
      • Figure 2: COVID-19 scenario forecasts for mortgages, 2015-25
    • Consumer credit relies on a confident return to spending
      • Figure 3: COVID-19 scenario forecasts for consumer credit, 2015-25
    • Extended disruption could see an extra £120bn saved by 2025
      • Figure 4: COVID-19 scenario forecasts for savings, 2015-25
    • Insurance is vulnerable to budget cuts in a less secure recovery
      • Figure 5: COVID-19 scenario forecasts for insurance premiums, 2015-25
    • The consumer
    • Financial wellbeing has hit new heights despite the crisis…
      • Figure 6: The financial wellbeing index, January 2015-March 2021
    • …and confidence is high for the year ahead
      • Figure 7: The financial confidence index, January 2015-March 2021
    • Spending cuts have kept household finances afloat
      • Figure 8: Impact of COVID-19 on household debts and spending, February 2021
    • Shift to online retail and hygiene concerns have hit cash use
      • Figure 9: Impact of COVID-19 on spending habits, April 2020-May 2021
    • Insurers have underwhelmed in their support for consumers
      • Figure 10: Consumer perceptions of how well different types of company have supported customers during the COVID-19 pandemic, March 2021
    • Finances have become a greater area of focus for many
      • Figure 11: The impact of COVID-19 on consumers’ approach to financial services, March 2021
    • A strong desire to keep saving
      • Figure 12: Financial behaviours consumers expect to increase in the future, March 2021
  3. Category Winners and Losers

    • Winner: savings
      • Figure 13: Monthly changes to household savings deposits, January 2005-March 2021
    • Loser: consumer credit…
    • …but, winner: ‘buy now pay later’ and digital payments
    • Loser: general insurers’ reputations
    • Winner: incumbent providers
    • Losers: branches
  4. COVID-19 Consumer Timeline

    • Phase 1 – January-March: Consumers go into lockdown
    • Phase 2 – March-June: Adapting to life in lockdown
      • Figure 14: Recorded daily number of confirmed cases of COVID-19 and deaths registered as relating to the virus, 30 January-31 August 2020
    • Phase 3 – June-September: Emerging from the initial lockdown
    • Phase 4 – September-December: Rise of the next wave
      • Figure 15: Recorded daily number of confirmed cases of COVID-19, 30 January 2020-28 March 2021
    • Phase 5 – January-March: Winter lockdown and vaccine roll-out
      • Figure 16: Cumulative number of first and second vaccines delivered in the UK, 10 January-31 March 2021
    • Phase 6 – March onwards: The roadmap out of lockdown
  5. The Post-pandemic Outlook for Financial Services

    • Regulatory measures will support sustained growth in mortgages
    • Demand for unsecured credit will rise when big-ticket spending returns
    • The digital revolution is almost complete…
    • …but branch networks will still carry value
    • A strong appetite to keep saving will be tested by opportunities to spend
  6. The Economic Impact

    • A record drop in economic activity…
      • Figure 17: Annual percentage change in GDP (fore), 2007-25
    • …as COVID-19 restrictions caused a severe fall in spending
    • Consumer spending is heavily dependent on the path of the pandemic
      • Figure 18: Household consumption index (scenario forecasts), 2019-25
    • Furloughs have saved millions of jobs…
      • Figure 19: Number of employments furloughed, time series, March 2020-February 2021
    • …but unemployment is forecast to rise when state support ends
      • Figure 20: Quarterly unemployment rate (fore), Q1 2008-Q1 2026
    • Under-25s have taken the brunt of COVID-19 job losses
      • Figure 21: Change in number of employees on payroll, by age, February 2021 vs February 2020
  7. Market Size and Performance

    • Impact of COVID-19 on financial services
      • Figure 22: Impact of COVID-19 on financial services, in short, medium and long term, 21 May 2021
    • Fall in mortgage lending mitigated by temporary stamp duty relief
      • Figure 23: Annual gross secured lending to individuals, 2015-20
    • Consumer credit hit by drop in consumer spending…
      • Figure 24: Annual gross consumer credit lending, 2015-20
    • …fuelling a savings boom
      • Figure 25: Household deposit balances at year-end, 2015-20
    • Income from insurance premiums dips, but only slightly
      • Figure 26: Total insurance premiums (new general insurance GWP, and protection and life insurance business in force premium income), 2015-20
  8. Market Forecast

    • Mortgages forecast to grow but the short-term picture will be mixed
      • Figure 27: Forecast for annual gross secured lending to individuals, 2015-25
    • Consumer credit set to return as restrictions are lifted
      • Figure 28: Forecast for gross consumer credit lending, 2015-25
    • Savings deposits forecast to top £2.3trn by 2025
      • Figure 29: Forecast for household deposit balances at year-end, 2015-25
    • Insurance to be held back by premium stagnation in the short term
      • Figure 30: Forecast for total insurance premiums (new general insurance GWP, and protection and life insurance business in force premium income), 2015-25
  9. COVID-19 Scenario Performance

    • Mintel’s approach to predicting the impact of COVID-19
    • Fundamental differences in how COVID-19 is affecting consumer markets
    • Extended disruption would delay, not cancel, mortgages recovery
      • Figure 31: COVID-19 scenario forecasts for mortgages, 2015-25
    • Consumer credit relies on a confident return to spending
      • Figure 32: COVID-19 scenario forecasts for consumer credit, 2015-25
    • Extended disruption could see an extra £120bn saved by 2025
      • Figure 33: COVID-19 scenario forecasts for savings, 2015-25
    • Insurance is vulnerable to budget cuts in a less secure recovery
      • Figure 34: COVID-19 scenario forecasts for insurance premiums, 2015-25
    • COVID-19 market disruption: risks and outcomes
      • Figure 35: Summary of Mintel scenario expectations and the impact on financial services, May 2021
  10. Consumer Concerns over the Impact on Health

    • Exposure anxieties align with case numbers
      • Figure 36: Mintel COVID-19 exposure anxiety and lifestyle impact index, 28 February 2020-12 March 2021
    • Exposure anxiety typically higher among over-55s
      • Figure 37: Proportion of adults indicating higher levels of anxiety (‘4’ or ‘5’) towards being exposed to coronavirus, by age, 28 February 2020-26 March 2021
    • Middle-age band fear transmitting virus
    • A lesson in health vulnerability can be a lesson in financial preparedness
  11. Consumer Concerns over the Impact on Lifestyles

    • Concerns about lifestyles impact outweigh exposure fears
    • Consumers react to unprecedented lifestyle restrictions
      • Figure 38: Mintel COVID-19 exposure anxiety and lifestyle impact index, 28 February 2020-12 March 2021
    • Lifestyle impact concerns high across all age groups
      • Figure 39: Proportion of adults indicating higher levels of anxiety (‘4’ or ‘5’) about how the outbreak could impact their lifestyle, by age, 28 February 2020-26 March 2021
  12. Impact on Household Finances

    • Financial wellbeing has hit new heights despite the crisis…
      • Figure 40: The financial wellbeing index, January 2015-March 2021
    • …but many still feel worse off than a year ago
      • Figure 41: Changes in household finances, January 2015-March 2021
    • One in six have been furloughed at least once
      • Figure 42: Impact of COVID-19 on employment and working patterns, February 2021
    • Income trends point to a two-track crisis and recovery
      • Figure 43: Impact of COVID-19 on personal income, February 2021
    • Cuts to discretionary spending have kept household finances afloat…
      • Figure 44: Impact of COVID-19 on household debts and spending, February 2021
    • …and led to a record savings boost
      • Figure 45: Impact of COVID-19 on the value of savings in different products, February 2021
    • Most are optimistic about the year ahead…
      • Figure 46: The financial confidence index, January 2015-March 2021
    • …and looking forward to getting back to experiences
      • Figure 47: Financial priorities when COVID-19 is no longer a concern, February 2021
  13. How the Pandemic Shaped Consumer Behaviour

    • Non-essential spending was slashed and remains subdued
      • Figure 48: Impact of COVID-19 on spending habits, April 2020-May 2021
    • Shift to online retail and hygiene concerns have hit cash use
      • Figure 49: Impact of COVID-19 on spending habits, April 2020-May 2021
    • A third have increased savings or started for the first time
      • Figure 50: Changes in the value of savings since the start of the COVID-19 pandemic, 4-12 March 2021
  14. Perceptions of Customer Support

    • Financial services brands rank below other sectors for COVID-19 support
    • Financial services support measures were less evident for most
      • Figure 51: Consumer perceptions of how well different types of company have supported customers during the COVID-19 pandemic, March 2021
    • Vulnerable consumers most likely to feel let down by banks and building societies
      • Figure 52: Consumer perceptions of how well banks and building societies have supported customers during the COVID-19 pandemic, by current financial situation, March 2021
    • Insurers undermined by familiar concerns
    • Younger consumers have the best perceptions of specialist lenders’ conduct
      • Figure 53: Consumer perceptions of how well credit card and loan companies have supported customers during the COVID-19 pandemic, by age, March 2021
  15. Impact on Financial Behaviours

    • Finances have become a greater area of focus for many…
      • Figure 54: The impact of COVID-19 on consumers’ approach to financial services, March 2021
    • …but this has not produced easy wins for challengers
    • Cautiousness and interest in value does not extend to product terms
      • Figure 55: The impact of COVID-19 on consumers’ approach to financial services, by age, March 2021
  16. Post-pandemic Financial Plans

    • A strong desire to keep saving
      • Figure 56: Financial behaviours consumers expect to increase in the future, March 2021
    • A step change in payments and digital channels
      • Figure 57: Expected level of use of cash when COVID-19 is no longer a concern compared to before the outbreak, March 2021
    • A quarter plan to beef up insurance coverage
      • Figure 58: COVID-19 and Financial Services: A Year On – CHAID – Tree output, March 2021
  17. Appendix – Data Sources, Abbreviations and Supporting Information

    • Abbreviations
    • Consumer research methodology
    • CHAID analysis methodology
      • Figure 59: COVID-19 and Financial Services: A Year On – CHAID – Tree output, March 2021
      • Figure 60: COVID-19 and Financial Services: A Year On – CHAID – Table output, March 2021
  18. Appendix – Central Forecast Methodology

    • Mortgages market forecast and prediction intervals
      • Figure 61: Lower bound, central and upper bound forecast for annual gross secured lending to individuals, 2020-25
    • Consumer credit market forecast and prediction intervals
      • Figure 62: Lower bound, central and upper bound forecast for annual gross consumer credit lending, 2020-25
    • Savings market forecast and prediction intervals
      • Figure 63: Lower bound, central and upper bound forecast for household deposit balances at year-end, 2020-25
    • Insurance market forecast and prediction intervals
      • Figure 64: Lower bound, central and upper bound forecast for total insurance premiums (new general insurance GWP and protection and life insurance business in force premium income), 2020-25
    • Market drivers and assumptions
      • Figure 65: Key drivers affecting Mintel’s market forecast (prepared 12 March 2021), 2020-24
    • Forecast methodology
  19. Appendix – COVID Scenario Performance Methodology and Assumptions

    • Mortgages scenario performance
      • Figure 66: COVID-19 scenario forecasts for annual gross secured lending to individuals, 2015-25
    • Consumer credit scenario performance
      • Figure 67: COVID-19 scenario forecasts for annual gross consumer credit lending, 2015-25
    • Savings scenario performance
      • Figure 68: COVID-19 scenario forecasts for household deposit balances at year-end, 2015-25
    • Insurance scenario performance
      • Figure 69: COVID-19 scenario forecasts for total insurance premiums (new general insurance GWP and protection and life insurance business in force premium income), 2015-25
    • Rapid COVID recovery, central and extended COVID disruption scenarios outline
    • Scenario methodology

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This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.

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