UK’s debt could slow growth for decades

A report by PricewaterhouseCoopers (PwC) has revealed the UK’s debt mountain could hamper growth for decades.

The assessment comes despite the Coalition Government’s attempt to reduce debt but PwC expects Britain’s total debt will exceed £10 trillion within the next five years.

Its research showed property-related borrowing and lending between banks resulted in the debt of households, businesses and Government expanding from twice Gross Domestic Product (GDP) in 1987 to more than 5 times by 2009.

“The UK’s addiction to debt has reached alarming levels during the past decade,” according to John Hawksworth, chief economist at PwC.

“The rise in debt of the financial sector from 46% of GDP in 1987 to 245% in 2009 is particularly striking as banks lent large amounts to the shadow banking sector and most financial institutions geared up in search of higher returns on equity,” the report said.

PwC also highlights that interest rates are likely to rise considerably between now and 2015 - and could possibly exceed the level seen prior to the recession.

Discuss this in the Finance Markets forums

Story link: UK’s debt could slow growth for decades