Sir Vince Cable has used his speech at the Credit Summit to issue a warning over the levels of indebtedness among consumers.
The Liberal Democrat leader – one of the Summit’s keynote speakers – noted that in the aftermath of the credit crunch of 2008, lenders and borrowers both became more conservative in their patterns, with personal borrowing falling from 155 percent as a share of GDP down to 133 percent.
However, Cable is concerned that trend is reversing, and could return to crisis levels in the early 2020s.
“In terms of trends, it is worth recalling that in that very limited period running up to 2008, personal debt as a share of GDP rose from 93 percent in 1997 to 150 percent at its peak in 2008, and it was out of that, that much of the financial crisis sprang,” Cable told delegates from across the credit profession.
“After 2008, lenders became more conservative for obvious reasons, and so did borrowers and the share of personal debt to GDP fell to about 133 percent in 2015. It’s worth noting that even after that very substantial contraction, it is still at historically high levels. What’s happened in the last three years is that personal debt as a share of GDP has started to rise again, and it’s now at roughly 140 percent and the projections are it will reach crisis-level of 155 percent around 2022/23.”
Cable warned the current trend is returning the industry to a similar territory it found itself in during the financial crisis.
“We need to acknowledge the significance of this,” he said.
The Liberal Democrats leader’s speech marks the final day of Credit Week, which has brought key decision makers from across the profession together with government policy makers. The week will conclude with the Credit 500 Gala dinner, at which the new members of the Credit 500 will be revealed, along with the Women in Credit Awards.
If you attended the event and would like the chance to win a magnum of vintage champagne, fill in this form.