Borrowing 'threatens UK economy'
Consumers must rein in their borrowing levels if a downturn in the UK economy is to be avoided, a report has warned.The Ernst & Young Item Club's latest report says that the strong UK economy rests upon shaky foundations, with excessive levels of household debt posing a serious threat.It states that through mortgages, credit cards and other loans, borrowers have racked up £1.3 trillion in debts, putting the long-term stability of the UK economy in jeopardy."The problem is that we are now becoming a little bit too confident and the lenders are relaxing their criteria and we're all gearing up appropriately," the Item Club's chief economic adviser, Peter Spencer, told BBC Radio Five Live."Of course that's great in the short term but for the longer term it does pose risks."We are borrowing to finance our consumption and of course we're doing that at a time when the economy and everything else, our personal finances, are looking pretty sweet. The worry is what happens to our own finances when things turn sour."He explained that although today's quarter-point interest rate hikes dwarf the full percentage point increases of the early 1990s, the size of today's £1.3 trillion debt means its "leverage and impact" is potentially as great.Mr Spencer also suggested that with younger homebuyers lacking first-hand memory of the property crash in the early 1990s, the housing market could prove an indicator of what may be to come."There are some very clear warnings of course on the other side of the Atlantic where they've had a similar borrowing binge and they've got serious problems with sub-prime lending, which looks as if it could spill over into the rest of the mortgage market," he said.
Share this..
Related stories
Public sector workforce rising again
One characteristic of the current UK government is the massive investment into public services and the enormous increase in public sector workers since 2000. A look back to the third quarter of 2004 shows an increase of nearly 35,000 public sector workers a figure which was repeated in the first quarter of 2005 also. However, between the first quarter of 2006 and the first quarter of 2008 there we...
Read MoreCould the price of oil derail the UK economic recovery?
As the UK economy continues to give conflicting signals to investors and consumers around the country the Independent Energy Agency (IEA) has today issued a report highlighting concerns that the price of oil could impact upon the worldwide economic recovery. Interestingly the IEA has found no evidence of increased domestic demand for oil in the short to medium term amid suggestions that speculator...
Read MoreShanks Group up for sale
As we covered yesterday, waste management company Shanks Group is currently embroiled in a battle with Carlyle Group which has launched a £1.35 a share offer for the company. The offer values the company at £536 million and while initially Shanks Group had rejected the approach the company has said it is willing to consider doing business at £1.50 a share. So what will happen next? In simple...
Read MoreIs confidence in the Irish economy misplaced?
The Irish economy has been very much in the news over the last few weeks and months with the collapse of the financial sector, significant government cost-cutting and various altercations with unions. However, there is a general feeling that the economy is on the verge of a turnaround with the Irish Prime Minister, Brian Cowen, suggesting that a return to rapid growth could happen as early as 2010...
Read MoreWhy does Lloyds bank need additional finance from the taxpayer?
Lloyds bank is rumoured to be on the verge of asking the UK government for an additional £5 billion from taxpayer coffers at a time when the UK banking sector has made strides but the likes of Lloyds bank and Royal Bank of Scotland still appear to be struggling. It seems that the call for extra funding centres upon the banks recent agreement to join the government's asset protection scheme and th...
Read More