Britons have highest debts in western Europe, says study

LONDON: Britons account for a third of all unsecured debt in western Europe, according to a new study.

Analysts at business research firm Datamonitor, who carried out the study, found that the U.K. consumer credit market reached 214 billion pounds in 2005, making the country the most indebted in western Europe. In comparison, the combined total debts for continental Europe was 600 billion. While Europeans average 1,558 pounds in unsecured debt, the British owe 3,175 pounds.

The country’s people have an “insatiable appetite for credit”, which has led to this situation, the analysts said.

Other European countries have developed a culture of savings and frugality, the analysts felt, while the people in France and Germany are averse to debt.

However, the study finds consumer credit growth in Europe is now outstripping the U.K. and the lenders in this country, who are facing a saturation problem, can hope to have an opportunity in Europe. This may also change the picture for Britain.

The study’s author and financial services analyst at Datamonitor Paul Marsh said U.K. lenders should now look for business opportunities overseas. The U.K. is a difficult place to do business, he said, due to the highly indebted nature of the population.

According to estimates, the total personal debt in the U.K., including mortgage debt, is around 1.2 trillion pounds.

The “buy now pay later” culture has helped the credit card industry in the country to such an extent that there are more than 50 million cards in the U.K. Almost a third of Britain’s unsecured debt is on credit cards compared with 1.6 per cent in France.

In another study, carried out by Sainsbury’s Bank, it has been found that the demand for funds is likely to continue as family costs are mounting in view of higher utility bills, increases in university tuition fees, etc. The bank estimated that the increase in tuition fees from 1,175 pounds to 3,000 pounds could lead to a rise of 21 per cent in the cost of living for an average student. This may lead to around 54 million pounds worth of personal loans being taken out to help cover the cost.

The Datamonitor study found that Germans tried to restrict their use of credit to buying cars. In France, which has 96 billion pound of unsecured debt in contrast to Germany’s 60 billion pounds, there is greater use of loans to buy household appliances and furniture as well as cars and home improvements.