Only so much spending can be whacked on to the plastic without courting financial disaster, and Britain’s central bank is making it crystal clear that limit has now been reached.
Consumer credit has been rocketing at a rate not seen in over a decade, soaring by more than 10 per cent in the year to April. That includes personal lending, which is up by 7 per cent; credit cards, up by 9 per cent; and the financing of car purchases, which raced ahead by a heady 15 per cent.
The figures for total amounts outstanding are huge: £72 billion (€81.3bn) in loans and overdrafts, £67 billion in credit card debt and £58 billion in car loan finance – almost £200 billion in total.
While overall consumer lending is relatively small compared with mortgage lending – less than 15 per cent – the amount of consumer loans that go bad is 10-times higher than with home loans.
No wonder, then, that the Bank of England wants to slow the pace of borrowing in an effort to avert a future crisis should the economy lurch into a more marked downturn.
By adjusting the so-called “countercyclical capital buffer”, Threadneedle Street is ordering the banks to increase their capital by £11.4 billion over the next 18 months, putting a brake on lending.
The central bank’s concern, expressed in its twice-yearly financial stability report, is that lenders have grown too accustomed to what it describes as the “relatively benign economic conditions” and will be unprepared for any shock.
Controls on lending criteria look to have slipped, too, something the bank also wants addressed. Underlining its concerns, governor Mark Carney said the bank intends to bring forward the consumer credit-related part of the annual stress tests by three months, to September, to ensure lenders – and borrowers – are not overstretching themselves.
It may be, however, that consumers will start to rein back on spending of their own accord.
Confidence has collapsed following the snap UK general election earlier this month and its disastrous impact on the political stability of the nation.
A survey from the polling organisation YouGov and the Centre for Economics and Business Research showed a “pronounced collapse” in confidence after the vote, leaving it at levels similar to those seen in the chaotic aftermath of the shock Brexit referendum a year ago.
It's not just the unsettling effect of the election, according to YouGov's Stephen Harmston, but also the continuing squeeze on household incomes because of rising inflation, and the further cooling in the property market.
As he points out, the seemingly unstoppable upward march of house prices has been one of the key factors fuelling consumer confidence in recent years.
What’s in a name?
What do you do when your corner shop is called “Singhsbury’s” but you get threatened with legal action by Britain’s second-biggest supermarket chain?
If you're Jel Singh Nagra, you simply change the sign over your store to "Morrisinghs" – and hope that the UK's fourth-largest food retailer has a better sense of humour than its larger rival.
The 42-year old shopkeeper from North Tyneside has proved there’s more than one way for a tiddler to fight back against the big boys in the cut-throat supermarket sector.
Having removed the “Singhsbury’s” sign some time ago after the national chain said it would see him in court, Nagra decided to have another go when he refitted his convenience shop.
Thanks to his background in marketing, it didn’t take long to conjure up the new name, he said. “It’s all a bit of fun and it rolls off the tongue. The customers love it.”
Fortunately, Bradford-based Morrisons seems to enjoy the joke too: "Mr Nagra and his customers obviously have good taste so we wish him well," a spokesman said.
Mr Nagra clearly does have a flair for marketing – the new store sign may have cost him £350, but he’s already earned way more than that in free publicity.
Meanwhile, market share figures for the big boys of the retail industry, released on Tuesday by Kantar Worldpanel, show sales increasing at their fastest rate in five years.
Fuelled by rising inflation, sales jumped by 5 per cent in the 12 weeks to June 18th, although the major food chains were once again out-performed by the discounters, Aldi and Lidl, which pushed their combined share of the market to a new record of 11.9 per cent.
Among the big chains, though, Morrisons turned in the strongest performance, with sales rising by 3.7 per cent. Perhaps that accounts for its benign response to Mr Nagra’s bit of fun.
Fiona Walsh is business editor of theguardian.com
