By Ben Simmons
The uncertain economic outlook continues to play on the mind of the UK consumer, and with no improvement in confidence since the financial crisis; households continue to struggle with some of the highest levels of debt in the world according to PwC’s annual report on the UK consumer credit industry ‘Precious Plastic 2012’.
Levels of unsecured borrowing fell for the third successive year by over £355 per household in 2011 and it seems UK consumers are finally showing commitment to paying off their debts. However, worrying signs remain in their ability to continue to pay off their debts, particularly in the 25-34 year old age group where 25% admitted to needing to use credit to fund essential purchases in the last year.
“UK consumers are among the most indebted in the world, with the average UK household still saddled with nearly £8000 of unsecured debt,” commented Simon Westcott, director in PwC’s Financial Services practice. “Although the UK Government’s austerity drive appears to be hitting home, with households paying off an average of £355 worth of their debt in 2011, three years of austerity by UK consumers has only made a small dent in the total levels of borrowing.
“In addition to this, our credit confidence survey has shown that there is a growing reluctance to borrow in the future and a marked deterioration in confidence about meeting repayments, particularly among 18 to 24 year olds consumers where less than half of those surveyed believing they will be able to repay their debts.”
Total household borrowing in 2011 remained relatively static compared to 2010 at £1.45 trillion. Within this amount, unsecured credit declined, with outstanding balances down £9.2 billion on 2010 to £206.6 billion. PwC believes this downward trend is set to continue with outstanding balances being under the £200 billion mark by 2013.