It was in February 2008 that Northern Rock fell and was nationalised and unsecured debt soared as the credit crunch wrapped its claws around Britain and began to squeeze. This was the beginning of a decline that would see unemployment soar and people living on the fringes of poverty all over the country. It began to be an issue to even put food on the table in Britain as the lean years set in. Not only were people having difficulty making ends meet, but there was also little possibility for credit approval and many turned in desperation to solutions that just compounded their problems. Loan sharks and pawn brokers began to be a regular place to find some cash. Payday loans were being taken out by people who had no possibility of paying them back. People were signing up for store cards and credit cards that were quickly maxed out.
Slowly we have seen Britain recover. Employment is up all around the country and particularly in Scotland people are starting up new businesses. Interest rates have fallen and it is easier to borrow money. But is this a good thing?
November saw unsecured borrowing reach an all time high since that fateful February in 2008. Figures rose by 1.25 billion pounds in unsecured borrowing leading up to the festive season. This marked the third time that more than 1 billion pounds of debt had been taken out by customers within the last five months.
Banks lent out approximately 980 million pounds to the public in the form of overdrafts and loans while around 399 million pounds was spent on credit cards.
The total amount of unsecured debt that is currently owed in Britain is 168 billion pounds. This amounts to 5800 pounds for each household. These figures are still, thankfully, a long cry from the 208 billion that Britain collectively owed back in 2008, and that didn’t even include their mortgages.
Interestingly enough, and this probably adds to the recovery of the UK economy, citizens consistently paid off more than they owed between September 2008 and September 2012. At the time, banks were not at all lenient with credit limits and stingy with overdrafts and loans. Now that it seems things are moving in the right direction, banks are back to offering the public great deals to win more customers and credit card companies are being accused of behaving like payday lenders. Borrowing has hit the roof, and since September 2012 trends have changed and people are borrowing more than they are paying back.
Howard Archer, who is the chief UK economist at HIS Economics blames the rise in national debt for November 2014 on Black Friday. This is a day where retailers in shops and online drop their prices radically for one day in order to boost Christmas spending. Experts gauge that 810 million pounds were spent. Howard Archer believes that “Relatively high consumer confidence means people have become more prepared to borrow in recent months.”