Credit card debt sees biggest fall since 1984
UK businesses borrowed £35.5billion last year, with £26billion more forecast by the end of 2021, according to research.
But consumers stuck in lockdowns cut spending, with credit card debt falling at its fastest levels in 26 years, the Financial Services forecast report by the EY ITEM Club reveals.
The 2020 levels of UK firms’ borrowing were £25billion higher than the average over the previous five years. Researchers found that small and medium-sized enterprises needed the lending options more than larger ones. Since the latest lockdowns, experts predict many businesses are unlikely to start repayments until 2024.
By comparison, consumers preferred to make credit card repayments. Lending via cards fell 9.9 per cent in 2020 – the largest fall since 1994.
This is expected to rise by 2.1 per cent this year if lockdown is eased, Mortgage lending is expected to grow 2.3 per cent this year – below the 3 per cent in 2020. The predictions assume lockdown lasts until the end of March, relaxing with vaccine rollout.
Anna Anthony, UK financial services managing partner at EY, said: “Financial services firms entered the pandemic in a position of capital strength and have continued to support the economy and business.
“By the end of this year, businesses will have borrowed £60billion since the start of the pandemic.
“And the prospect of some not being able make the required repayments is concerning for all involved. Banks are also contending with another year of squeezed interest margins and subdued consumer lending.
“Insurers are facing Covid-19 related payouts and the impact of the FCA pricing review.
“However, the outlook is a little more positive for UK asset managers, with assets under management set to rise in 2021 and 2022 as global markets recover.”