Household debt in the UK has increased by 7% in the past five years
UK’s total debt in 2012 was £1,518.5bn, but this has now increased to £1,630.1bn in 2017 and most of it is consumer credit. The UK government plans to cut its annual deficit year on year until 2025, but households are going in the opposite direction. This could spell another financial crash.
It is not a surprise to many analysts that with wages growth adjusted for inflation (and excluding bonuses) at just 0.7% over the same five-year period, consumers are turning to credit to buy essential items.
There are concerns that borrowing on loans, credit cards, overdrafts and second mortgages has rocketed. Making matters worse, many households have doubled up on their debts by getting into arrears on their monthly bills, especially council tax.
A country’s debts have four elements – household debt, corporate debt, government debt and the trade balance, if it is in deficit.
The UK, a G7 country has fuelled GDP growth with increasing amounts of consumer debt in recent years. The UK also runs a large trade deficit and operates with a shortfall in government spending. Corporations, on the other hand, have hoarded cash and as a group have the healthiest balance sheets in modern times.
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