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UK Consumer Credit Outlook

Britons’ borrowing enters uncharted territory

Unsecured lending reaches an all-time high

2016 has seen unsecured borrowing in the UK rise to a record £270bn, according to our ninth annual survey of the country’s unsecured lending landscape. Conducted against the backdrop of the country’s vote to leave the European Union, this year’s research offers a post-Brexit snapshot of individuals’ attitudes towards their finances and provides key insights for lenders on the opportunities and risks ahead.

Total unsecured debt in the UK for 2016 reached £270bn, a record high

Unsecured borrowing in the UK is now at an all-time high, with credit card, overdraft and personal loan debt (among other types of borrowing) standing at the equivalent of close to £10,000 for every household in the country. 

Rising 9% in 2016, unsecured debt exceeded its pre-crisis peak, reaching close to £270bn in 2016, a £56bn increase from 2007. We expect this figure to continue to increase, with debt as a proportion of household income set to reach around 165 per cent by 2020, a level last seen in the run-up to the financial crisis. 

British consumers show more credit confidence now than at any point since 2009

Despite the relatively high levels of borrowing, Britons’ credit confidence is at its highest level since PwC’s Credit Confidence Survey began in 2009. Continued low interest rates, record levels of employment and above-inflation earnings growth have combined to underpin these relatively high levels of confidence. Also, the proportion of UK consumers worried about their finances (for example their ability to make repayments and secure credit) has dropped continuously over the past seven years. 

Brexit has not adversely affected credit confidence overall. Although, as our report findings show, younger segments and those who voted Remain are more worried.  

Relative to other banking products, unsecured lending delivers strong returns

Unsecured lending continues to deliver strong returns for lenders, with bad debt in 2016 falling back to pre-crisis levels and credit spreads improving. Retail banks might be expected to prioritise unsecured lending given the margins available and the pressure on other product lines, following this year’s further reduction in interest rates. However, with mortgage lending and credit for small and medium-sized enterprises accounting for around 90% of the balance sheet of a typical UK bank, unsecured lending exposures may perhaps not be given the attention they deserve.

Contact us

Simon Westcott

Partner, Strategy& UK Financial Services lead, PwC United Kingdom

Tel: +44 (0)7595 610434

Isabelle Jenkins

Leader of Industry for Financial Services, PwC United Kingdom

Tel: +44 (0)7711 773030

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