It was reported yesterday that the total amount of money owed by UK residents is a higher figure than that of the gross national income – for the second year in a row. The total amount owed by consumers through mortgages, loans and credit cards rose by 7.3% during the year to the end of June to stand at a staggering figure of £1.444 trillion, according to the report by accountants Grant Thornton. However, during the same period, gross domestic product, or GDP, rose by only 5.1% to £1.41 trillion – meaning that personal debt outweighs this figure. As a result, it has been calculated that it would take up until January 2009 to pay off the total debt in the UK from GDP during one calendar year.
These figures are made even more worrying by the fact that this is the second year in which this trend has been reported – showing that the credit crunch has not assisted with the UK debt crisis, despite the tightening of lending criteria it has seen. These figures suggest that the UK economy has a hard struggle ahead if it is to buck this trend.
UK GDP will contract by 0.2 per cent over 2009, according to new analysis.
Capital Economics forecasts the first annual shrinking in the economy since 1991 – with the credit crunch's squeeze on lending knocking the economy into recession.
The economy is also seen to suffer from a slowdown in the eurozone – halting any hopes the low value of sterling would promote demand for exports.
Domestic demand is also expected to suffer.
Jonathan Loynes, chief UK economist at Capital Economics, said: "The upshot is that, after growth of about 1.2 per cent this year, we now expect the UK economy to contract by about 0.2 per cent in 2009. We previously forecast growth of +0.5 per cent.
"This projection is well below the latest consensus forecast of +0.9 per cent."
It said that reforming the rules to allow a loosening of fiscal policy through increased borrowing in the short term would be misguided at a time when the Government is expected to be in the red to the tune of 3.5 per cent of GDP this year and next, and is set to breach the 40 per cent of GDP ceiling on the national debt set by Gordon Brown from 2009 onwards, according to the fund's forecasts.
UK economy at '60-year low'
The British Chancellor has given a stark warning - the credit crunch is worse than first thought.
In a frank admission Alistair Darling says the UK's economy is at a 60-year low.
He predicts it will be more profound and last much longer than most people had feared.
It comes after the British Prime Minister Gordon Brown gave assurances that a recovery plan was in place.
Wow, those headlines sound eerily familiar.
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