Credit experts voice concerns over runaway consumer debt

The spike upwards in UK consumer debt as inflation exceeds low wage growth has been branded a 'serious problem', according to more than 200 of the world's leading experts in credit.

Consumers are growing over consumer borrowing levels. Picture: John Devlin
Consumers are growing over consumer borrowing levels. Picture: John Devlin

And two-thirds of them predict there is likely to be another credit crunch by 2022, the University of Edinburgh Business School reveals today.

Following its recent biennial Credit Risk and Credit Scoring conference, the business school said three-quarters of the 200 credit control specialists questioned said the Bank of England was “right to be concerned” about the “extraordinary” growth in UK consumer debt.

Sign up to our daily newsletter

Consumers are growing over consumer borrowing levels. Picture: John Devlin

On the tenth anniversary of the beginnings of the financial crash, more than a third (38 per cent) believe a new financial crisis could occur even sooner – within the next three years.

The findings come against the backcloth of the Bank of England announcing in July that unsecured consumer credit had risen to £200 billion for the first time since 2008 – the height of the last financial crash.

Professor Jonathan Crook, director of the Credit Research Centre at the University of Edinburgh Business School, commented: “The view of our expert delegation echoes concerns that have been expressed recently by the Bank of England about lenders being complacent about consumer lending levels.

“Having been reluctant to publicly commit to rate rises, it’s unlikely we’ll see any changes this week. But reality may bite sooner than expected if lenders, concerned about an increased incidence of consumer defaults, increase rates to help off-set the risk.”

Consumers are growing over consumer borrowing levels. Picture: John Devlin

Nine out of ten of the experts said should borrowing levels continue “unchecked” due to ultra-low interest rates there will be a rise in consumers defaulting on the repayments.

Almost three-quarters (73 per cent) of the credit specialists at the conference predicted the UK’s departure from the EU “will harm consumer and businesses’ ability to obtain credit when they need it”.

Crook said: “Moody’s [the credit rating agency] has already warned that the UK could be looking at a credit downgrade if negotiations fail to get the right sort of deal.

“The truth is that this situation is unprecedented and we need talks to progress further before we can better predict what will happen.

“For now, the global experts that gathered at the University of Edinburgh last week are clear that we’ll be feeling the effects of our departure from the EU for years, perhaps decades, to come.”