UK households’ demand for credit card borrowing has plunged, in another sign that the public are tightening their belts due to Brexit uncertainty.
The Bank of England’s latest credit conditions survey showed on Thursday that demand over the next three months for such unsecured lending in Q4 is expected by lenders to be the weakest since the survey began in 2007.
The net percentage balance fell from -7.2 in Q3 to just -20.7. This was weaker than the previous record low of -20.4, hit during the 2008-09 recession.
Household spending accounts for around 60 per cent of the UK economy and any weakening of the appetite for consumers to spend will be negative for overall GDP growth.
“The survey reinforces belief that heightened uncertainties focused on Brexit are likely to weigh down on the economy in the near term at least,” said Howard Archer of the EY Item Club.
He added: “The very low household savings ratio and the prospect of gradual interest rate rises over the coming months are likely to limit consumer willingness to borrow.”
Consumer confidence indicators have also been weakening, with the most recent Growth from Knowledge survey showing the worst reading in more than five years.
UK household credit card borrowing growth rates peaked at 9.5 per cent year-on-year in February 2018, according to separate Bank of England data.
The rate has since slowed sharply, falling to 8 per cent in November.
The Bank also reported on Thursday that the demand for credit from large corporations fell in the final quarter of 2018 and was expected to “decrease significantly” in the first quarter of 2019.
Credit demand from small and medium-sized companies was also expected to be negative.
The UK economy grew by 0.6 per cent in the third quarter but GDP growth is expected by many analysts to have collapsed to 0.2 per cent or below in the final three months of the year as business investment and household spending slowed down sharply.
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