WILL DEBT DRAG THE ECONOMY INTO RECESSION?

After a turbulent few weeks, the US economy looks set for a recession. Is the UK set to follow suit? And what will this mean for UK businesses.

Recent research has found that nearly two million people owe more than £10,000 on credit cards, overdrafts and unsecured loans.

The government’s second quarter insolvency statistics showed a fall in the numbers of people going bankrupt or taking out an IVA but, with the summer season over and no let up from the Bank of England likely, it is heavily predicted the figures will be breach the 30,000 for the first time.

The slowdown in borrowing will mean more gloomy news for retailers. The high-street boom was largely financed by the increase in debt, both on unsecured loans and equity withdrawal from houses that had grown in value. As consumers’ focus switches from borrowing to paying off their debts and saving, there will be less money to spend in the shops and the current retail slump may last for some time. A struggling retail sector is also bad for the UK’s overall economic growth, as almost 70% of GDP is due to consumption.

For expert advice on how to combat the threat of recession contact Carlo Pegna on 01992 890391 or e-mail carlo.pegna@mastercollections.co.uk.

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