Factors Affecting Total Levels of Uk Unsecured Debt 1993-2011
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Factors affecting total levels of UK unsecured debt 1993-2011
Total personal debt in the UK has tripled between 1993 and 2010, from a figure of £400bn to £1.46 trillion (Bank of England, 2010a). Although around 85% of this figure, £1.24 trillion is secured debt against property, the amount of UK household unsecured debt, not back by any asset, has also seen massive growth and change during this period. Figure 1 (source, Bank of England) is a graph representing this rapid change.
The graph gives the 1993 figure of household unsecured debt as £50 billion. The next five years to 1998 show it doubling to £100 billion, and then continuing to rapidly increase to a peak of £240 billion in 2008. The graph also shows a plateau from 2005 at £210 billion till 2007 before a surge to its peak in 2008. The level then declines almost back to its 2007 level by mid 2010. What factors could have accounted for these changes? Let’s examine each in turn, beginning with the rapid rise through the 1990’s and 2000’s.
In the mid 1990’s, employment was low, average earnings were growing steadily and interest rates were lower than those in the 1970’s and 80’s. This gave people more scope to take on debts. The 1990’s and early 2000’s saw the continued growth of the consumer society, with a greater emphasis on buying, and spending almost being seen as a leisure activity. Attitudes were changing with earlier notions of financial prudence being replaced by a different approach to spending and indebtedness, the ‘buy now, pay later’ culture emerged. There was a greater acceptability of debt with less social stigma attached and a greater peer pressure to ‘have it all now’, rather than save up for products. These social pressures on consumption (symbolic consumption Chapter 3) arguably encouraged people to take on debts to finances aspects of a sought after lifestyle. You could even argue that government policy today can be seen to encourage personal indebtedness e.g., with growing...
Total personal debt in the UK has tripled between 1993 and 2010, from a figure of £400bn to £1.46 trillion (Bank of England, 2010a). Although around 85% of this figure, £1.24 trillion is secured debt against property, the amount of UK household unsecured debt, not back by any asset, has also seen massive growth and change during this period. Figure 1 (source, Bank of England) is a graph representing this rapid change.
The graph gives the 1993 figure of household unsecured debt as £50 billion. The next five years to 1998 show it doubling to £100 billion, and then continuing to rapidly increase to a peak of £240 billion in 2008. The graph also shows a plateau from 2005 at £210 billion till 2007 before a surge to its peak in 2008. The level then declines almost back to its 2007 level by mid 2010. What factors could have accounted for these changes? Let’s examine each in turn, beginning with the rapid rise through the 1990’s and 2000’s.
In the mid 1990’s, employment was low, average earnings were growing steadily and interest rates were lower than those in the 1970’s and 80’s. This gave people more scope to take on debts. The 1990’s and early 2000’s saw the continued growth of the consumer society, with a greater emphasis on buying, and spending almost being seen as a leisure activity. Attitudes were changing with earlier notions of financial prudence being replaced by a different approach to spending and indebtedness, the ‘buy now, pay later’ culture emerged. There was a greater acceptability of debt with less social stigma attached and a greater peer pressure to ‘have it all now’, rather than save up for products. These social pressures on consumption (symbolic consumption Chapter 3) arguably encouraged people to take on debts to finances aspects of a sought after lifestyle. You could even argue that government policy today can be seen to encourage personal indebtedness e.g., with growing...