British Banks Forecast Biggest Consumer Credit Collapse In 10 Years

As if Theresa May did not face enough challenges, the latest survey from The Bank of England (BoE) suggests the British consumer is about to face the biggest credit crunch since the great financial crisis.

After repeated warnings from BoE about the surging pace of lending to households, British lenders are planning the biggest cutback in consumer loans in nearly 10 years (BoE's quarterly net balance of lenders' expectations for the availability of unsecured lending over the next three months fell to -28.6 from -16.2.)

Earlier this year the BoE warned lenders may be dicing with a "spiral of complacency", with car loans a particular area of worry, and now, as The New York Times reports, this latest survey signals the steepest contraction since the fourth quarter of 2008, when the economy was in the depths of its worst post-war recession.

Thursday's survey figures showed Britain's consumer economy is running out of steam, said Joanna Davies, economist at Fathom Consulting, the only forecaster in recent Reuters polls to predict a recession.

 

"We're quite concerned about the consumer squeeze," Davies said, citing falling wages in inflation adjusted terms and historically low household savings.

 

"If you add tightening credit conditions onto that, it doesn't bode well."

Pouring more cold water on Britain's recoveryt hopes, after seven years of persisting with a forecast of rebounding productivity, the Office for Budget Responsibility (OBR) has thrown in the towel.

“As the period of historically weak productivity growth lengthens, it seems less plausible to assume that potential and actual productivity growth will recover over the medium term to the extent assumed in our most recent forecasts,” the watchdog said.

 

“Over the past five years, growth in output per hour has averaged 0.2 per cent. This looks set to be a better guide to productivity growth in 2017 than our March forecast.”

That paints a gloomy picture for future economic growth, pay rises and the government’s finances.

The report notes that “some commentators have argued that advanced economies have entered an era of permanently subdued productivity growth for structural reasons”.

Comments

Escrava Isaura koan Fri, 10/13/2017 - 12:33 Permalink

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koan: Most every country in the EU is suffering the same outcome, almost as if it was intentional... It was. So was in Japan before. And it’s coming to the US. And there’s even a name for it: It’s called liquidation by cutting credit.  

In reply to by koan

caesium Five Star Sat, 10/14/2017 - 04:36 Permalink

The UK has had productivity issues ever since Germany came on line in the 19th century. It's solution has always been to blow up Germany. Joining the EU they hoped to imitate them but instead they got Thatcherism and abandoned any attempt to imitate. Britain's business plan is usury and war.  

In reply to by Five Star

CRM114 Fri, 10/13/2017 - 11:49 Permalink

On any other planet, it wouldn't take 7 years of forecasts that far off reality to have people screaming "LIARS!" ..unless you're the IPCC of course, in which case feel free to take 20 years ;)

CRM114 Fri, 10/13/2017 - 12:07 Permalink

Advice to the BoE / UK Government.If you want to know why UK productivity is f#cked, get off your fat backsides and head down to a local trading estate. Try starting up a business. Try fighting thru all that red tape you spew out. Try getting any of the utilities to show up within 2 weeks of when they say they will. Try dealing with the local inspectors, who will demand you have a permit to be able to apply for a permit to get permits, and then the answer is "NO" anyway, after 6 months waiting. And your competitor who is a mate of a councillor gets that permit 2 days later.  Give up on local youngsters because they are incapable of turning up on time and working an 8 hour day. Hire foreigners who seem great, work their socks off....then land you deep in the hole having to redo an entire job because "We always do it that way in Poland/Bulgaria/India."

Pretorian CRM114 Fri, 10/13/2017 - 12:36 Permalink

Yeaa  get rid of those whites Poland/Bulgarians... and get aboard more Pakistani, Indians and Africans.  And if you didnt have Polish and Bulgarians you would not have "that way neather"  UK would have to payout with huge inflation for "for british skills full of hot air" .  Housing in London look like ones in Pakistan with majority of housing  over 120years old full of molds and rats.  

In reply to by CRM114

mily Fri, 10/13/2017 - 12:18 Permalink

I live in the UK, and it amazes me how many unemployed folks in my neighbourhood drive brand spanking new BMWs/Merces/Lexuses, not to mention several mates/colleagues leveraged up their eyeballs on their tiny flats made of shitty components with a 30+ year mortgage with a ~1.2% teaser fixed rate. I on the other hand: no mortgage, no debts, lock, stock - the fochin' lot.  Sale of the fochin' centry is coming.

venturen mily Fri, 10/13/2017 - 12:21 Permalink

come on in...the credit waters are fine...be like everyone else...gamble to the max...and then get the government to rescue you EVERYTIME! You should have borrwed EVERY FRICKING Penny...and bought BitCoin...beacuse who doesn't love something backed by NOTHING!

In reply to by mily

surf@jm mily Fri, 10/13/2017 - 12:26 Permalink

And when they get thrown out of their cars and houses, due to non payment, they will be camped out in your yard, with the blessing of government.....Thats if the government doesn`t raise your taxes, to give them their cars and houses for free.........

In reply to by mily

KimAsa Fri, 10/13/2017 - 12:33 Permalink

Two currency unit's worth of debt generates one currency unit's worth of goods and services. Central banks are a net drag on the overall economy.

GreatUncle Bunga Bunga Fri, 10/13/2017 - 15:41 Permalink

You got to love rate hikes, in effect that is when the real economy starts to burn.QE just staved it off since 2008 ... now all those who invested money on creating businesses during the malinvestment easy money years are going to get crushed to pay for it.They were sucker punched into starting up businesses as the government / economists manipulated all the data.DO NOT BELEIVE GOVERNMENT MIGHT BE A USEFUL CONCEPT TO TAKE ON BAORD FOR THE FUTURE

In reply to by Bunga Bunga

JibjeResearch Fri, 10/13/2017 - 14:09 Permalink

Theresa May is incompetent... the world is treating her that way...  England is the laughing stock right now....They need a new leader... for a quick fix..Brexit... is retarded from the start....Just like Bannon....It's the reason Trump distants himself from them...

adonisdemilo Fri, 10/13/2017 - 14:11 Permalink

I wouldn't pay too much attention to Mark Carney at the BoE.He got the prospects arse about tit regarding the Brexit vote.Ex Goldman, that's really all you need to know.Talking his book, probably taking the opposite side of that trade.He also cut rates to try and induce the effects that he PROMISED would happen if we voted to leave.The man's an imbecile.WRONG ON EVERY COUNT.

GreatUncle Fri, 10/13/2017 - 15:38 Permalink

They will blame it on BREXIT but this was going to happen whatever the outcome.Country no longer has no national assets of worth to flog neither having sold all them off over the last few decades for easy money.In effect they have been selling national assets to keep it all going and that is about to end.Biggest crunch is how do they expect to pay all those state pensions in a decade they promised people for best part of 50 years now?NOT A FUCKING CHANCE.UK government in reality is renaging on all agreements between itself and the population ... there is going to be some really pissed natives and "settled migrants".

activisor Sat, 10/14/2017 - 04:08 Permalink

The real causes of Britain's, and Europe's financial woes, are Globalisation and austerity. These political ideologies have destroyed the middle classes, enriched the few, and created enormous private and public debt.  Political leaders, in the main, are traitors to their nations.

caesium Sat, 10/14/2017 - 04:25 Permalink

In order to get around Brexit, the CEOs will bring in Africans, Indians and Pakistanis. It's already happening. Astonishing that people actually voted for more 3rd World immigration. The CEOs hate the British people as much as the politicians. The CEOs, who have lost access to the single market, will want revenge. That means yet more stealing from pension funds and uncontrolled 3rd World immigration. British morons regurgitate American bs after Brexit: "We are free". Yes free to be fucked in the ass by the elite.