The amount of extra debt taken on by UK consumers doubled last month, according to data from the Bank of England on Friday, raising fears that people are resorting to credit cards and other forms of borrowing to fund increases in the cost of living.
The BoE data found that UK consumers borrowed a net £1.8bn in June, up from £0.9bn in May, most of which was on credit cards. The annual growth rate for consumer credit hit 6.5 per cent, the highest level since before the coronavirus pandemic.
“We are seeing a significant increase in consumer borrowing, with many households feeling the strain of living costs increasing, prompting consumers to fund their expenditure through borrowing,” said Shushill Suglani, senior economist at consultancy Cebr.
A sharp increase in fuel bills and food prices pushed inflation to a 40-year high of 9.4 per cent last month, piling pressure on household budgets.
According to Cebr, the jump in utility bills has left outgoings exceeding income for many householders. The situation is expected to deteriorate in the coming months as inflation heads towards double digits. Consultancy BFY Group this week warned that gas and electricity bills for some of the most vulnerable households could rise to £500 a month in January.