Brexit is on the horizon but that’s not the only thing to be worried about, the UK’s personal debt is.

For the first time in three decades, UK households have spent more than they earnt. The Office of National Statistics has reported average outgoings exceeded income by £900 in 2017, a total close to £25 billion. This has led to many households being forced to dip into their savings or take out loans to fund daily living expenses, and sometimes they are doing both.

The Bank of England (BoE) is raising concerns over personal debt

It’s not gone unnoticed. The BoE has previously raised their concerns about the level of UK personal debt. Most of us will remember the fallout from the 2008 financial crisis. And understandably the BoE wants to avoid any repeat of widescale financial armageddon if they can possibly help it.

However, their research found the rise in consumer debt was being driven by the most creditworthy borrowers. They are taking advantage of low-cost car loans and interest-free credit cards. A far cry from the spurious loans handed out to the subprime market in the mid-2000s. So maybe there isn’t such a problem after all?

What’s causing the UK population to spend more than they earn?

You might think it is down to unemployment. However, at first glance, the most recent employment statistics was announced at just 4.2% unemployment, down from 4.5% a year earlier. It’s never been lower and matches the previous best in 1975. But that doesn’t consider the ongoing pressures of inflation and low wage rises. As the graph below from the ONS shows – real wages are barely above where they were 13 years ago.

ONS wage graph


What does this mean?

Unfortunately, we don’t own a crystal ball as much as we would like to. So we don’t exactly know how things are going to play out in the next 12 months. And there’s often a tendency to err on the side of pessimism when faced with significant change – especially one the size of Brexit.  But there’s certainly plenty of amber warning lights to keep your eye on right now, and that’s just what we’ll be doing.