Record UK Bank Write-offs of Personal Debt

Posted on 01/09/2010

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The Times, Bloomberg and the Daily Mail have all reported this morning on news released yesterday by the Bank of England showing that, in the words of the Daily Mail:

“Between April and June banks and building societies were forced to ‘write off ‘ £3.5bn, around £40m every day, the largest amount since records began.”

I think, in order to put this into perspective, it is worth having a look at the medium term trends in these write-offs, which can be seen in the chart below:

When seen in this context, I believe this news presents a rather worrying trend.  Because these write-offs represent a bank’s opinion that this money will not be recovered, they usually occur concurrent with or prior to personal insolvencies, home repossessions and individual voluntary arrangements.  Whatever the legal mechanism used, each leaves the individuals involved with much lower future purchasing power as they redirect income to repay the remaining indebtedness.  Consequently, this provides more evidence that UK personal consumption is likely to remain weak in the near future.

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Posted in: Economy, My Thoughts