Vince Cable Warns Of Growing Indebtedness

21st March 2018

Sir Vince Cable has used his speech at the Credit Summit to issue a warning over the levels of indebtedness among consumers.

Speaking at the Credit Summit 2018, the liberal democrat’s leader warned that our current economic conditions are appearing eerily similar to the conditions just before the 2008 credit crunch. Both periods featured conservative spending behaviour on account of squeezed finances, with personal borrowing having also taken a dramatic fall back in 2008.

Mr Cable, along with a number of experts, fear that 2018 Britain is bordering on another financial crisis, with interest rates, business rates and Brexit uncertainty already taken the lives of numerous businesses this year alone. Despite the reluctance amongst consumers to spend, personal debt continues to rise, mainly due to the increase in consumer credit. If our credit does indeed get crunched as before, it will not only affect our consumers but also business owners and employees.

Our consumers have been conservative with their spending since the ‘hard Christmas’ last year when the historically prosperous Black Friday did not attract as many shoppers as predicted. While borrowing numbers are down, there are still other factors that could drive consumers- and businesses- into debt. When our members approach us with late payments or bad debt, we not only track these invoices down but also ‘credit manage’ their finances, ensuring their invoices lead them to prosperity rather than gloom.

Sir Cable is concerned these tough conditions could return the economy to crisis levels by the early 2020s.

“It is worth recalling that in that very limited period running up to 2008, personal debt as a share of GDP rose from 93 percent in 1997 to 150 percent at its peak in 2008, and it was out of that, that much of the financial crisis sprang,” Cable told delegates in his speech at the summit.

“After 2008, lenders became more conservative for obvious reasons, and so did borrowers and the share of personal debt to GDP fell to about 133 percent in 2015. It’s worth noting that even after that very substantial contraction, it is still at historically high levels. What’s happened in the last three years is that personal debt as a share of GDP has started to rise again, and it’s now at roughly 140 percent and the projections are it will reach crisis-level of 155 percent around 2022/23.”

While inflation remains high and morale remains low, consumers will get themselves into debt. It is therefore important that businesses are prepared for more hard Christmases in the future. While consumers may not go on shopping sprees in the future or indulge in ‘big ticket’ items, that does not mean they will not spend. Investing in new technology, bigger offices, or even just more helpful and knowledgeable employees can boost your business prospects easily.

At the Credit Protection Association, we help many of our members expand their business. By freeing up cash flow, our retail members can afford in-store iPads for customers, more varied online services, and a larger stock load. A little (or a lot) of extra cash could make a business a success and give the owner’s confidence a bit of a boost too. Our debt recovery services get our members the cash, while our credit checks and reports, ensure they keep it. Sir Cable may fear for the future, but there is still time to change it.