Sub-prime lender Provident Financial has said UK government spending cuts would have only a “modest” impact on its customers.
The Bradford-based group had previously warned that the government’s austerity drive was likely to weaken demand for home credit.
But it said that while demand for borrowing had been “subdued” over the summer months, sales levels had picked up in recent weeks and were now running ahead of the same period of last year.
It added that government plans to cap the level of benefits that households receive at around £500 a week would affect less than one per cent of its home credit customers, with less than half of them receiving any benefits at all, other than child benefit or the state pension.
The group, which offers small, short-term loans to people who would have trouble borrowing from mainstream lenders, said the majority of its home credit customers were employed part-time or on a casual basis, or were paid by the hour.
As a result, they were unlikely to be hit by the public sector job cuts, which were likely to affect only one per cent of people who borrowed from its sub-prime lending arm Vanquis Bank.
Instead, it said the changes to the labour market may actually increase the number of non-standard borrowers, although it added that due to the current uncertainty it would continue to impose strict credit conditions.
Peter Crook, chief executive officer, said: “We expect the direct impact of the Government’s spending review on the group’s customer base to be modest but continued tight underwriting and close attention to margins and costs will remain in place over the coming months until there is evidence of a sustained economic recovery.”
The group said its home credit customers, some of whom have been affected by shorter working hours, had continued to be cautious over the summer.
But it said sales levels had improved in recent weeks, in line with the traditional seasonal trend as people returned from holidays.
Despite the pick up, the slow summer has left trading in the business slightly short of its plan for the end of the third quarter.
The customer growth rate remained at between four per cent and five per cent during the three months to the end of September, but the group said this was likely to moderate during the rest of the year, as it was now putting a greater emphasis on lending to good quality, existing customers.
The home credit business completed its move to a new head office in Bradford this month, bringing its operations together into a single building. But the move will result in a one-off hit of £2.5 million.