New statistics published by TUC following the festive period have shown that consumer borrowing in Britain has peaked.
The analysis comes as a warning to individuals who may be turning to borrowers to pay off the cost of Christmas and just months after headlines reporting on personal debt concerns being a lifelong problem for UK individuals, which we blogged about here.
Results from the analysis reveal that unsecured debt (all debt excluding mortgages) per household had risen to £15,385 in the third quarter of 2018, which is an increase of £886 on the previous year. These statistics are taken from quarter three, so do not include the Christmas period itself.
Other shocking stats published in the analysis include:
- Total unsecured debt rose to £428bn in the third quarter of 2018 – a record high, and well above the £286bn peak in 2008 ahead of the financial crisis,
- Unsecured debt as a share of household income is now 30.4% – the highest it’s ever been, and above the level it reached in 2008 ahead of the financial crisis (27.5%).
This crisis is seen to be largely blamed on the National Living Wage with many believing that it is too low, leaving millions of households resorting to borrowing as means of getting by.
Back in late October, Chancellor Phillip Hammond in his Autumn Budget announced that the National Living Wage will to rise this April. The National Living Wage paid to workers aged 25 or over will rise from £7.83/hour to £8.21/hour. But according to TUC General Secretary Frances O’Grady, the minimum wage should be raised to £10, a more reasonable figure to cover the costs of living.
Although an increase in the National Living Wage seems reasonable for the working individual and could arguably prevent people from turning to their credit cards, the view of the business owner is somewhat different. The long term cost of the rise could leave thousands of UK employers worried about how they are going to find the extra money to pay their employees. As a result of rising wages of staff over the age of 25, businesses may be left having to make cuts in other areas, in some occasions reducing numbers of staff, or passing on the higher costs to customers through higher prices.
Other suspects claimed to have contributed to increased borrowing can be found here.
Despite an economy that is “not working for workers”, leaving families worse off today than before the financial crisis, there are a number of options available to individuals who are struggling to cope with their debts. If you require advice on solvency or cash flow problems please get in touch with our team of business recovery and insolvency experts on 01392 667000.