Sales of UK structured retail products fell by just over 15% in 2003 largely as a result of a collapse in income product sales, according to information provider StructuredRetailProducts.com

The market contracted from £6.8bn to £5.36bn last year after income product sales fell from £1.89bn in2002 to £770m in 2003. However, sales of growth products grew from £4.39bn in 2002 to £4.59 in 2003.

StructuredRetailProducts.com managing director Robert Benson said: “While income products suffered a double adversity in the fallout from ‘precipice bonds’ and a lower volatility, growth products were boosted by uncertain markets.”

Norwich Union product development manager Richard Kelsall agreed that the market was not suited to income products, although Norwich Union launched an equal number of growth and income products last year.

“Structured income bonds have come in for some bad press over the year peaking with the compensation claims and penalty imposed on Lloyds TSB in September,” he said.

“The current market is showing much lower volatility than in early 2003 and this, coupled with low interest rates, makes structured income products look poor value in relation to deposit rates.

The economic environment we are currently experiencing certainly favours capital secure, growth products.”

There was a massive rise in the issuance of structured products and a big increase in the absolute number of both providers and regular issuers last year.

An increase in growth product issuance lead to a total of 500 structured products being launched in 2003, compared to 307 in 2002.

The number of companies offering products also expanded from 68 providers in 2002 to 86 in 2003.

However, the top 10 issuers accounted for 55% of total sales.

Many of last year’s providers only launched a single issue.

The stocks and shares ISA remained the dominant wrapper for structured products.

Call-based, option-based products were the most common type of pay-off and the FTSE remained the underlying index of choice although there were niche showings of Halifax House Price Index products.

The trend for longer dated products continued in 2003.