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Turbulent economic conditions in Europe have exposed consumers to uncertainty as to what the future holds. This has important implications for financial services (FS) providers and their client interactions.
Scope
- The report discusses the economic events influencing the European consumer and the likely effects on their product and provider choices
- Extensive secondary research allows detailed analysis as to the opportunities presented by the recovering European consumer.
Highlights
The recently established Office for Budgetary Responsibility (OBR) has estimated that the UK national debt will peak at 70.3% of GDP in 201314, reduced as a result of the cuts made in the recent budget.
Cash-strapped governments will be limited in the support that they can offer. It therefore rests on consumers to seek private means to protect themselves and FS providers to convince consumers of the gravity of this need.
European consumers will continue to seek to minimize uncertainty in 2010 through tighter control on what they can influence. They are attempting to increase their knowledge and understanding but FS providers must meet them halfway.
Reasons to Purchase
- Understand the economic uncertainty and drivers of policy impacting the European market.
- Understand how these events will influence the decision making of consumers, now and in the future.
- The report provides insight into the opportunities presented by the changing European climate for FS providers
Table of Content
Overview
Catalyst
Summary
Methodology
Table of Contents
Table of figures
Table of tables
Uncertain Economic Climate
Introduction
TREND: National debt will limit future economic growth in Europe
The European debt situation is a serious threat to a global recovery
The Greek debt situation threatened to boil over into a full blown crisis at the beginning of 2010
A major component of the Greek debt threat was the risk of contagion with other major economies
The rescue package has relieved many market concerns but comes at a cost
Some economists believe that the threat to the eurozone is not yet over
Returning debt to manageable levels will be a lengthy and potentially painful process
The magnitude of public debt is higher than that which could be solved by economic growth alone
The impact on growth is somewhat ambiguous but the cuts will still be felt by consumers
TREND: Monetary policy will be tightened as inflationary pressure increases
Consumers have seen record lows in central bank interest rates but this will change as the recovery gains pace
Expectations of inflation may well rise if monetary policy is mistimed
Monetary policy in the UK provides a particular challenge, with rising inflation expectations and a fragile recovery
Monetary policy surprises may well reveal vulnerabilities in the EU banking sector
There remains sizeable variation in the finances and economies of European countries
The UK must be careful not to ignite inflation in a still weak economic recovery
France looks to 2011 before freezing public sector spending
Germany’s finances are in better shape than its neighbors’ but action is still needed
Italy aims to bring its mammoth national debt under control and currently retains the market’s confidence
The Netherlands will see its public finances stagnate in 2010 before strengthening in 2011, depending on the political balance of power
Spanish unemployment is nearing one in five and is not set to improve until 2011
Sweden suffered a tough recession but is set to recover quickly, with a relatively light fiscal burden
THE CONSUMER RESPONSE
The uncertain climate will create opportunities for FS consumers
INSIGHT: Confused consumers will need guidance, particularly in a changing savings and investments landscape
The savings and investment environment will be in flux as savings accounts move in sync with central bank rates and incentives change to align with new tax regimes
ACTION POINT: Better access to advice should be a priority for both the public and private sector
INSIGHT: Consumers must be made to understand that bank lending will remain constrained
INSIGHT: Mortgage competition could heat up as consumers reconsider the value of their standard variable rates
ACTION POINT: Uncapped SVRs are coming into more use as mortgage lenders protect themselves from future low interest rate regimes
INSIGHT: Pensions providers must stress the importance of private pension income
Consumers need to be made aware that they are responsible for looking after themselves in retirement
ACTION POINT: Pension provision must be simplified to make a clear solution apparent to consumers
INSIGHT: European consumers will seek simple products that protect them against potential risks in these uncertain times
Consumer watchdogs which expose complicated superfluous products will encourage consumers to stick to what they know
ACTION POINT: Product presentation has never been more important as consumers are not willing to invest significant time in understanding the prospective offerings
Scarcity of information can dissuade the jittery European consumer
INSIGHT: Insurance providers should step into the gap left by a depleted state presence
Income protection and mortgage payment protection could provide consumers with a support structure should the worst occur
Private health insurance products may appeal as waiting times are likely to increase with government cuts beginning in earnest
Healthcare cash plans could be an attractive outlet for increased concern over medical provision
ACTION POINT: The importance of ‘taking care of yourself’ must be highlighted
APPENDIX
Methodology
Further reading
Secondary sources
Ask the analyst
Datamonitor consulting
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