Provident hit by fears of austerity

SUBPRIME lender Provident Financial saw its shares hit yesterday after warning the UK government's "austerity" spending cuts could particularly hit its client base.

Provident, Britain's biggest "doorstep lender" and the main player in the Scottish home credit market with 200,000 customers north of the Border, said the potential for soaring job losses from the public-sector cost-cutting drive posed a risk to consumer appetite for home credit, with a weak employment market already tempering demand.

Provident's shares fell nearly 7 per cent, or 61.5p, to 821p as the market was also jolted that the company's interim figures out yesterday missed some analyst forecasts.

The group reported pre-tax profits up just 2 per cent at 54 million for the first half of 2010 - below the forecasts of two leading analysts.

Bradford-based Provident, which also owns Vanquis Bank, said although it was encouraged by a 5.4 per cent hike in home credit customer numbers, "demand for home credit continues to reflect cautious behaviour from some customers in the context of an employment market which is unlikely to change in the near future. The group is also mindful of the potential for unemployment to increase as a result of the government's fiscal austerity programme".