The UK’s financial services industry is set to have a “challenging” 2018 according to a forecast published today by the EY Item Club which says that, while a current inflation squeeze will ease consumer spending is likely to be restrained and consumer credit growth will slow.
The report also says that mortgage lending will continue to grow with a modest 2.4% rise this year.
It also warns that business lending will decline 0.9% this year as demand for bank lending dampens and firms tap alternative sources of finance.
On the bright side, the forecast for 2018 and following years is better than previously anticipated, due to a stronger than expected economy and the expectation of securing a Brexit implementation period.
Inflation is set to fall and interest rates are forecast to rise gradually this year, albeit slowly, and from record lows.
Omar Ali, EY’s UK financial services managing partner, said: “2018 won’t be an easy year for UK financial services as Brexit uncertainties continue to linger, affecting consumer confidence.
“But, the outlook is better than envisaged due to stronger than expected economic growth, and even though there will only be low growth in disposal incomes, lending is expected to rise steadily again over the next few years.”
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