UK consumer borrowing slowed sharply in December, says Bank of England

Annual growth of unsecured lending in the month fell to 6.6 per cent, down from 7.2 per cent in November

UK consumer borrowing slowed sharply in December, adding to the impression of weakening confidence among households ahead of Brexit.

The Bank of England reported that the annual growth of unsecured lending in the month fell to 6.6 per cent, down from 7.2 per cent in November.

This was the weakest figure since December 2014.

Credit card lending growth slowed to 7.1 per cent, down from 7.9 per cent the previous month.

Surveys have shown consumer confidence to be at a 5 year low due, in part, to concerns over Brexit.

The Bank of England’s credit conditions survey showed last week showed that demand over the next three months for such unsecured lending is expected by lenders to be the weakest since the survey began in 2007.

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 UK economy grew by 0.6 per cent in the third quarter of 2018 but GDP growth is likely to have fallen sharply in the final three months of the year as business investment and household spending fell.

“The ongoing slowdown in net unsecured consumer credit growth to a 4 year low in December 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, and economic forecasting group.

“The decline in the flow of borrowing was a key driver behind the slowdown in growth in household spending last year,” said Samuel Tombs of Pantheon Macroeconomics.

Consumer borrowing slowdown

The Bank also reported on Wednesday that residential mortgage approvals slipped to 63,793 in the month, down from 63,952 in November and below the 6 month average of 65,624.

Last week a deputy governor of the Bank of England, Ben Broadbent, suggested concerns about high unsecured consumer debt levels were misplaced, arguing that most of the growth in recent years has been acccounted for by personal contract purchases (for vehicles), car finance and student loans.