One of the UK’s biggest insurers now thinks a recession is coming
Key Points
- Admiral now puts a 55% probability on recessionary outcomes for the UK economy
- The severe scenario in its lending models rose to 25% from 15% a year ago
- Its blended forecast has unemployment at 6.3% in 2027 and growth of 0.1%
- Cover held against unsecured personal loan losses rose to 8.7% from 7.1%
- Admiral's loan book still grew 39% year on year to £1.88 billion
Admiral now attaches a 55% probability to recessionary outcomes in the UK economy, and has set aside more money to cover loans customers fail to repay.
The figure appears in the accounts of Admiral Money, the lending arm the group runs alongside its insurance business.
Admiral builds four economic scenarios, assigns each one a probability, and uses the weighted result to decide how much to hold back against bad debt. It updates the scenarios with an outside economics provider.
Admiral has shifted those weightings over the past year. Its base case now carries a 40% probability, down from 50% at the same point in 2025, while its severe scenario has risen to 25% from 15%. The downside scenario holds steady at 30% and the upside at 5%.
What the scenarios show
The base case assumes the economy grows 1.1% this year and 1.6% next, with unemployment at 5.4%. The downside scenario has the economy shrinking 0.8% in 2027 and unemployment peaking at 6.2%.
The severe scenario, which Admiral has raised the odds on, assumes a 2.0% contraction in 2027 and unemployment hitting 8%.
Blending all four gives growth of 0.1% in 2027 and unemployment of 6.3%. The same weighted view has household unsecured borrowing climbing from 12.9% of disposable income this year to 15.0% by 2030.
Admiral has raised its cover accordingly. It now holds back 8.7% of unsecured personal loan balances against losses, up from 7.1% a year ago, with car finance rising to 1.9% from 1.2% and homeowner loans to 0.3% from 0.2%. The charge it took for expected credit losses over the half year came to £20.5 million against £11.7 million.
Admiral is still lending
The tighter provisioning has not slowed the business down.
Gross loan balances grew 39% year on year to £1.88 billion, covering unsecured personal loans, car finance and secured homeowner loans, and Admiral Money turned a profit of £13.3 million against £12.5 million.
The company said its loan book continues to perform strongly and credited its focus on high-quality lending.
Admiral also flagged political uncertainty as an added drag on the UK economy, and said questions over future fiscal and economic policy could weigh on business and consumer confidence.
