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Provident Financial cautious on UK economy

Sub-prime lender Provident Financial has issued a rather downbeat assessment of the UK economy after reporting profits of £54 million for the first half of 2010, down on analyst expectations of £57 million. While you would assume that in dire economic situation such as the one faced by UK consumers today, subprime lenders would benefit but this does not appear to be the case.

It is becoming evident that the UK population is more concerned than ever before about the outlook for the UK employment market. As a consequence, fewer potential customers of Provident Financial, and other subprime lending groups, are willing to step forward and take on further debt at this stage of the economic cycle. Quite how those at the lower end of the income spectrum in the UK will make ends meet as the economy begins to struggle with budget cuts remains to be seen.

While on the surface the mainstream banks in the UK, and large financial companies, appear to be picking up from lows hit during the recession, under the surface there are still major concerns about the potential for the UK economy in the short to medium term. As consumer confidence will ultimately play a major role in improving the UK economy, are investors right to be cautious?

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