UK Household Debt at 23-Year Low Offers Hope of Consumer Revival

UK household balance sheets are in their best shape for over two decades after a period of spending restraint that has taken a heavy toll on the British economy. For politicians and the Bank of England, the question is: Will consumers now feel confident enough to loosen the purse strings?

Debt as a share of household incomes has plunged almost 40 percentage points from its 2008 peak to 117.1% in the second quarter of this year, the lowest since 2002, according to the Office for National Statistics. Close to half of that decline has come since the end of 2020, a period of surging inflation and rising interest rates that both lifted wages and created incentives not to borrow.