The UK’s total debt stock is projected to reach £6.7 trillion by 2023, rising from £5.1 trillion in 2017, according to new analysis by PwC. While the government is likely to continue to reduce the size of its debt relative to GDP over the next five years, households and companies are both expected to borrow at a faster rate than economic growth. The net effect will be a gradual rise in the economy’s total debt-to-GDP ratio from 252% in 2017 to just under 260% in 2023.
Although the projected increase in the UK’s debt stock and the rise in debt repayments are relatively modest, they will come on top of already high levels of debt. Total UK debt stock grew steadily from below 200% of GDP at the turn of the millennium to around 260% by the time of the global financial crisis. By 2023, total debt could again be approaching this level.
John Hawksworth, chief economist at PwC, says: “While the financial crisis led to the private sector deleveraging, we’ve seen a change in behaviour among households and non-financial companies since 2015, when they began to accumulate debt at a faster rate than nominal GDP growth.
“The unusual amount of uncertainty facing the UK economy in 2018-19 due to Brexit, London’s stumbling housing market and the likelihood of further interest rate increases, means a pause in debt accumulation relative to GDP is possible in the short term. But if a smooth Brexit transition is agreed with the EU and UK business and consumer confidence recovers, the private sector is likely to resume faster rates of borrowing that could cause the debt stock to rise further relative to GDP.”