UK Public Is Borrowing Less – But Economic Fears Could Reduce Spending
Not everything that came along with the COVID 19 crisis was an affliction, at least for the UK public. The times that we are presently living in are in no way normal. The public activity that we are witnessing with context to expenditure is also not normal.
When the interest rates are being reduced and the overdraft charges are being minimized, you would normally expect the public to don the hat of shopaholics. But, curiously enough, the wave of spending has not picked-up speed this time around.
The UK public is keen on paying off their non-mortgage debts, and credit card bills. Oddly enough, a similar situation was observed during the financial crisis of the late 2000s.
There is something about the crisis that triggers a sense of financial awareness and responsibility in the public. More so this time around, or else, how can you explain the monthly debt repayment of £7.4billion?
One can argue that with everything closed down, the options for public spending their wage money and government subsidy is minimal. Shopping malls, movie theatres, amusement parks are all being closed down, so where will the money go. Better spend it to repay the loans.
The UK public is prioritizing their debt repayment, and getting their finance in order. So that when everything opens up, they can adjust to the economic changes without any sort of financial burden.
This is the financial responsibility of the mood/awareness that we are talking about.
From the standpoint of financial stability post the lockdown phase, it seems that it is not only a lack of spending opportunities that affected the public expenditure, it is also the mindset of being at pace with the economic realities of the post COVID-19 period. This period could even include inflation that outlives the current wage value in terms of purchasing power.
It is also important to note that people are not only paying the debts, but they are also saving money, as the expenses have come down. This is being done to create a buffer for the future seems to be the mood of the nation.
There is a snarky correlation between consumer spending and business raising funds. On one hand, the consumers have paid £5bn worth of credit card bills in April, while on the other hand, the business took a loan of £8.4bn to stay afloat.
Even after the lockdown norms are relaxed, experts believe that consumer spending will be relatively low. Also, with the rise in unemployment, an economic recession is something that is very much on the cards.