Consumer debt exceeds GDP once again

by Gill Montia

Story link: Consumer debt exceeds GDP once again

Personal debt in the UK has exceeded the nation’s gross domestic product (GDP) for the second successive 12 month period.

Accountant, Grant Thornton, has been researching consumer debt and has revealed that the total amount owed via mortgages, loans and credit cards increased by 7.3% during the year to the end of June.

The figure now stands at £1.444 trillion; by comparison, GDP increased by 5.1% during the period, to £1.41 trillion.

As a result it would take until 8th January to pay off the UK’s outstanding consumer debt from GDP, during a calendar year.

The overrun reflects a trend whereby the date on which GDP has covered consumer debt has been inching ahead.

According to the accountant, the UK is suffering from years of cheap borrowing and despite the credit crisis and a return to more responsible lending, levels of debt in the UK could continue to grow at a faster rate than the national income.

The current level of debt is well covered by the UK’s housing stock but if the housing market and economy continue to weaken, there could be a marked increase in personal insolvencies.

Personal insolvencies exceeded 100,000 in both 2006 and 2007 and the firm is predicting a sharp rise in the fourth quarter of 2008 and into 2009.