UK credit binge pushes debt above 500% of GDP

Heather Stewart, “UK credit binge pushes debt above 500% of GDP,” The Guardian, 19 January 2012

An international study found Britain had the highest level of debt after Japan, that the debt had risen over the past three years to more than 500% of national output, and that on current trends it would take until 2020 for UK households to return debt levels to the pre-bubble trend. …

n a 60-page report comparing major economies since 2008, McKinsey finds that, while the US is making progress in the “great deleveraging”, as economists call it, increased borrowing by financial firms pushed up Britain’s debt from 487% of GDP in 2008 to 507% by the middle of 2011. In 2003, before the credit binge, it was 300%.

In 2008, it stood at 487% of GDP. “While the largest component of US debt is household borrowing and the largest share of Japanese debt is government debt, the financial sector accounts for the largest share of debt in the UK,” it says. “Although UK banks have significantly improved their capital ratios, non-bank financial companies have increased debt issuance since the crisis.”

Read the full article here.