Equity products winning over the high-street investor

A new report from the authoritative independent market analyst, Datamonitor, claims that banks will soon be forced to produce a new generation of high-value savings products because improving stock market conditions will entice British households to invest more in equity market products.

A new report from the authoritative independent market analyst, Datamonitor, claims that banks will soon be forced to produce a new generation of high-value savings products because improving stock market conditions will entice British households to invest more in equity market products.

While deposits accounted for 54 per cent of total household retail savings in 2003, Datamonitor reckons their share of total savings will drop to just under half within four years.

Vikram Sehgal, financial services analyst at Datamonitor and author of the report, said: "Banks are now faced with the challenge of how to competitively retain as much business as possible, and must offer to track base-rate rises consistently, as opposed to only during an introductory period. Given the large number of similar deposit accounts on offer, banks and building societies need to review their product range to rationalise needless accounts. Banks and building societies should structure simplistic and transparent offerings, which signals integrity and good value."

Mr Sehgal found that there was a revival in consumer sentiment in the second half of last year. As market conditions liven up after the slump over recent years, he expects household savings and investments in the UK to total £1,840bn in 2008, a 40 per cent increase on 2003 levels, which totalled just over £1,300bn. While deposits are still forecast to increase by over 30 per cent to £919bn in 2008, they will account for less than 50 per cent of total balances.

"This decline also suggests that the bad publicity awarded to equity markets and related products is overrated," Mr Sehgal said.