‘Buy now, pay later’ attitude could put economy at risk, says Begbies

 

Shoppers across the country could be putting the economy at risk by opting to buy now and pay later, it was claimed yesterday. 

The insolvency specialist Begbies Traynor said a rise in spending had reduced the number of consumer-facing companies in distress over the past three months while sales were boosted by good weather and confidence in the economy. However, it warned that this may not be a good thing for the UK with the housing market threatening to overheat.

 Julie Palmer, a partner at the company, said: “With pay growth still lagging behind inflation, this consumer-led improvement could have worrying consequences for the wider economy as research suggests that this resurgence is being funded by a rise in household credit.

“With rising property values prompting still more consumers to increase borrowing – even amid fears of an imminent housing bubble – we are reminded of the boom years prior to the economic downturn of 2008, and hope this is not a sign of UK consumers repeating past mistakes.”

Begbies said the number of UK businesses experiencing critical financial problems fell from 3,001 in the second quarter to 2,951 in the three months ending 30 September.

Consumer-facing industries including bars and restaurants, hotels, food and other retailers experienced a marked reduction in the number of companies suffering critical distress,  falling 30 per cent, 21 per cent, 16 per cent and 8 per cent respectively.

The news came as a separate report by the EY Item Club confirmed that consumer credit is improving after a four-year slump. It said the amount of credit has fallen by 23 per cent, or nearly £50bn, since 2008, but will notch up a small increase this year.

Despite this, net lending to businesses is expected to have fallen this year, adding weight to fears that the recovery is too heavily balanced towards household spending.

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