Household borrowing in the UK saw a significant upswing in November, particularly in the realm of credit card usage. This surge in borrowing can be attributed to either consumers preparing for a substantial Christmas season or individuals trying to combat the rising prices. The Bank of England’s credit conditions survey indicates that net consumer credit rose by £1.23 billion, surpassing economists’ initial prediction of £800 million. Of this growth, the largest portion came from an additional £900 million borrowed on credit cards.
The previous year’s festive season was heavily impacted by the coronavirus lockdowns, leading to a Christmas season that many Britons would prefer to forget. As a result, it appears that households were determined to make the most out of Christmas in 2021. The unexpected increase in borrowing on credit cards serves as an indication of UK consumers’ intentions to create a special and memorable holiday season.
Several factors contributed to the rise in borrowing. For one, individuals who were concerned about supply shortages may have chosen to do their Christmas shopping early. This led to a 1.4% increase in November’s retail volumes. Furthermore, there was a significant decrease in savings growth, with household deposit accounts reduced to £4.5 billion in November compared to an average of £11.2 billion over the past 12 months. This decline in savings suggests that some consumers were confident enough to spend a higher proportion of their income, while others with lower incomes may have needed to tap into their savings to cover rising expenses.
It is important to note that these borrowing figures were obtained before the surge in Omicron Covid variant cases. While the increase in borrowing indicates an improvement in the economy during the middle of the fourth quarter, it remains to be seen how the new variant will impact borrowing and consumer behavior in the future.
Overall, the borrowing data from November underscores the resilience and determination of UK households to make the most of the Christmas season. Whether it was due to concerns about supply shortages or the necessity of managing rising prices, consumers were willing to elevate their borrowing on credit cards. The evolution of this borrowing trend in the face of ongoing economic and health challenges is yet to be seen.
Useful links for further reading:
1. Bank of England Credit Conditions Survey Q4 2021
2. The Guardian – UK Household Borrowing Sees Surge in November
