UK debt could increase to levels not seen since the financial crisis over the next five years, a new study has revealed.
According to the research, debt could rise to £6.7 trillion by 2023, a jump from the current figure of around £5.1 trillion.
The figure – which as a percentage of GDP rises to some 260 per cent – closely resembles levels seen in the height of the 2008 financial crisis.
The finding comes after research found that borrowing by companies and households is expected to grow at a faster rate than economic growth, with low income households expected to feel the full force of rising debt interest payments.
Student loan and car finance debt is expected to be a major attributor to the significant rise of the UK’s overall debt, as total debt repayments rise from around £150 billion in 2017 to some £250 billion in 2023, assuming a rise in interest rates to two per cent.
Commenting on the study, economist and report author John Hawksworth said consumers and non-financial companies have changed their relationship with debt since 2015 and now accumulate debt at a faster rate than nominal GDP growth.
He added: “The unusual amount of uncertainty facing the UK economy in 2018-19 due to Brexit, London’s stumbling housing market and the likelihood of further interest rate increases, means a pause in debt accumulation relative to GDP is possible in the short term.
“But if a smooth Brexit transition is agreed with the EU and UK business and consumer confidence recovers, the private sector is likely to resume faster rates of borrowing that could cause the debt stock to rise further relative to GDP.”
