UK 'might be worst hit by credit crunch'

06/10/2008

High levels of personal debt and the economy's exposure to the banking sector will mean that the UK is hit harder by the credit crunch than other countries in Europe.

This is the opinion of some experts, after the crisis worsened last week.

In the UK, Bradford & Bingley has become the second financial firm after Northern Rock to be taken over by the government - as investor confidence in banks continues to decline.

Although several European banks have been bailed out in a similar way, many of these nations' economies are less dependent on financial services than Britain.

Moreover, their consumers tend to be less exposed to mortgage, loan and card debt.

Speaking to the News of the World Paul Dales, UK economist at Capital Economics, said that Europeans are "better placed to weather the storm" because "consumers have saved more and don't have as much debt" - while Howard Archer at Capital Economics added that the UK was "particularly exposed" to the downturn.

Kevin Still, EuroDebt director, commented: "I think it is important to differentiate between those consumers who routinely use credit and those that don’t. When you only look at consumers using credit, the average level of unsecured debt becomes much higher at £21,650 which should be added to their secured borrowing on mortgages, secured loan and hire purchase agreements.

"The cost of borrowing is rising and the level of disposable income is reducing rapidly for these people and saving is not an option if you are going backwards every month… People need to take professional advice well before missing payments to critical priority creditors."

Credit Action, a charity, claims that total personal mortgage, loan and card debt among Britons currently exceeds £1.4 trillion - or £30,000 for every adult in the country.

Tags; Current UK Economy, Young Family Finances, Retirement Money Problems, Credit Card Lifestyle, Recent Graduate Debt,

Regional Debt Advice; Debt Advice Bingley, Debt Advice Bradford,

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