Personal debt exceeds Britain's GDP

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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 £1.444 trillion, according to accountants Grant Thornton.

But during the same period gross domestic product (GDP) rose by only 5.1% in nominal terms to £1.41 trillion.

As a result it would take until January 8, 2009, to pay off the UK's outstanding consumer debt from GDP during a calendar year.

The date at which GDP can cover consumer debt has been getting later and later during the past decade, after falling on August 23 in 2007 when personal debt amounted to just £503 billion and GDP was £786 billion.

The group said the figures showed that despite tighter lending criteria and a reduced availability of debt as a result of the credit crunch, the UK was continuing to suffer from the legacy of cheap borrowing over the past few years.

Stephen Gifford, Grant Thornton's chief economist, said: "Despite the global downturn flattening the growth of personal debt and UK GDP over the past few quarters, debt levels continue to grow at a faster rate than the income the UK generates.

"Although there is no cause for panic as personal debt is well covered by the UK housing stock, the figures clearly illustrate the continuing problem of growing personal debt levels in the UK."

During the past 10 years, the number of people declared insolvent has risen from an average of 24,000 a year in 1997 to more than 100,000 a year in both 2006 and 2007.

The latest figures show that 49,607 people have been declared insolvent during the first six months of this year, and Grant Thorton is predicting the total number for 2008 could be more 100,000 and close to 120,000.