It appears that U.K.’s consumer lending is in free fall as the public shows less to zero interest in taking personal loans or credit card debts.
The forecast—which was conducted by EY Item Club, an economic forecasting arm working under the accounting giant Ernst & Young—suggests that U.K banks are likely to lend less to consumers this year, with consumer lending estimated to plunge by 15.9%.
On the flip side, separate figures provided by the Bank of England showed that debt repayment since the first month of lockdown has racked up.
In April, for instance, debt repayment soared to $8.6 billion, making it the highest repaid debt since 1993. Separately, the bank accumulated a total of $18.3 billion of consumer credit debt repayment from March to June.
Experts like Omar Ali said that the figures only show the public’s sentiment towards the U.K. economy while treading the pandemic. It appears that consumers are becoming more cautious when it comes to money and spending.
“Covid-19 has caused unprecedented challenges for the UK economy, putting a financial strain on both businesses and households, and has resulted in a staggering amount of money being lent to firms over a short period,” Omar told The Guardian.
In addition, the drop will also be the sharpest decline in history since record-keeping started in 1993, per the EY Item’s data. The trend is expected to rally in 2021, but the group pointed out that the total borrowings next year will still be below pre-pandemic levels and will not surpass 2019’s $265 billion until 2022.
While consumer lending is expected to slide down, banks lending money to U.K. business owners has surprisingly soared. The surge is said to be the result of the national government’s initiative to support businesses financially.
And it looks like the upward trend will continue stronger this year.
The EY Item group said that business lending in the U.K. would see an increase of 14.4% compared to 2019’s total percentage. It will also be the segment’s biggest growth after more than ten years, noting that business lending before the pandemic had declined on average.
As seen in Bank of England’s report, the authors wrote:
Small and medium-sized businesses continued borrowing a significant amount from banks. In June, they drew down an extra £10.2bn in loans, on net, as gross borrowing remained strong.
Meanwhile, business lending for huge firms accumulated a 4.8% slump in its annual growth ratings. Some banks, including HSBC, Barclays, and Lloyds Banking Group, have written off loans worth billions of pounds already as a preparation for a looming recession.
Featured image courtesy of rangizzz/Shutterstock
ActiTime is a useful time tracking tool for managing the productivity of a remote workforce.…
Tiger Woods may have fallen asleep during his car accident in February, according to a…
Renowned Silicon Valley investor Ron Conway sees the crypto economy as the next multitrillion-dollar opportunity…