LONDON (Reuters) - British consumers borrowed money at the fastest rate since early 2008 in the three months to September, a correction to Bank of England data showed on Thursday, fuelling concerns that the country’s recovery is reliant on debt.
Earlier this week the central bank reported the greatest number of mortgage approvals since February 2008 and stronger business lending, but said the pace of unsecured lending to consumers had slowed.
However on Thursday the BoE said it had made an error, and that net unsecured lending in fact rose by 864 million pounds ($1.4 billion) in September - more than double the 411 million pounds first reported and the biggest jump since December.
This in turn raised the growth in unsecured lending in the three months to September to an annualised rate of 5.8 percent, a pace not seen since April 2008, when Britain was tipping into recession due to the financial crisis.
“The revisions are much more in line with what was expected,” said Ross Walker, UK economist at Royal Bank of Scotland, who had forecast 700 million pounds more borrowing, based on strong retail sales and consumer confidence data.
The error was caused by manual adjustments not being made to figures from a small lender on the borderline for inclusion in the BoE dataset.
Soon after the initial figures were released on Tuesday, BoE Governor Mark Carney said Britain’s economic recovery was being driven by consumer spending and higher house prices, and that he hoped new businesses would get more funding to give a broader basis for future growth.
Figures from mortgage lender Nationwide earlier on Thursday showed a faster-than-expected 5.8 percent annual rise in house prices this month - the biggest in over three years - while a GfK consumer confidence survey reported a slight fall in morale from September’s six-year high.
Walker said consumer spending was needed to get Britain’s recovery going, but that it would not be sustainable over the long term for borrowing to grow far faster than earnings, which have risen by just 0.7 percent over the past year.
“For me there is an amber warning light here - not an immediate risk but a medium-term financial stability concern,” he said, adding that British households already had too much debt. “The notion that we have gone through a full deleveraging cycle ... is abject nonsense.”
Reporting by David Milliken; Editing by John Stonestreet, Ron Askew