New analysis shows that debt in UK households is rising with average debts of £12,887. This is based on figures between July and September in 2016. During the same period in 2015, the average was £11,770.
The analysis by the TUC, who help to promote workers rights and equality in the workplace, also highlighted a big change in total UK debt. The total level of unsecured debt has increased to £349 billion. This is more than the previous high of £290 billion in 2008 – the start of the financial crisis. The £349 billion figure also includes student loan debts. If we exclude student debts, the Bank of England last week said that UK unsecured credit stood at £192 billion in November last year.
The level of unsecured debts, as a share of household income, is now 27.4%. This is the highest it’s been since 2008.
These increases in household debt are a warning that families are struggling to get by on their pay alone. Unless the government does more for working people, they could end the New Year poorer than they start it.
Employment may have risen, but wages are still worth less today than nine years ago. The government is relying on debt-fuelled consumer spending to support the economy, with investment and trade in the doldrums since the financial crisis.
TUC General Secretary, Frances O’Grady
A tax threshold change will also mean that you’ll be able to earn up to £11,500 per year before you start paying tax and there will also be a 30p increase in the National Living Wage from April 2017 (which applies to all workers aged 25 and over); a move that was mentioned in the recent 2016 Autumn Statement.
While workers could be better off from an employment view, the cost of imports in the UK could be set to rise as the value of the pound began to fall last year. There is still uncertainty of what lies ahead for the UK economy with the Brexit process due to start by the end of March. See how it could affect your finances on our blog.