Debt is often a significant burden which is faced by many families up and down the country, and it can often prove difficult to eliminate. Many people are juggling difficult financial circumstances, and it takes a concerted effort to tackle these problems head on. However, it appears many have used the time spent indoors to do just that.
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Figures from the Bank of England revealed a record amount of debt from credit cards and personal loans was repaid in April – soaring to a staggering £7.4billion.
This is the largest net repayment since records from the central bank first began in 1993.
Collectively, credit card debt was reduced by £5billion, a figure which is more than double the previous record net repayment set only a month earlier at £2.4billion.
However, while the outstanding balances on loans also fell by a further £2.4billion, UK consumers still have a significant amount of debt.
The Bank of England stated the total consumer credit lending now stands at £64billion, which is still a sizeable sum.
The net borrowing drop appears to be driven by Britons taking out less new credit than previously.
Overdraft interest rates dropped, with £500 interest-free overdraft buffers required by the Financial Conduct Authority (FCA).
It is thought the increase in debt repayments somewhat correlates with a record plunge in retail spending in April.
Data from the Office for National Statistics (ONS) revealed retails sales volumes witnessed a drop of 18.1 percent in April.
No physical sector of the retail industry was spared, and it is only online retailers who managed to cash in, with an 18 percent increase in sales.
Jonathan Athow, deputy national statistician for economic statistics at ONS, said: “The effects of COVID-19 have contributed to a record monthly fall in retail sales of nearly a fifth.
“Fuel and clothing sales fell significantly while spending on food also dropped after the surge from the panic buying seen last month. Off-licence sales, however, continued to increase.
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“Online shopping has again surged as people purchased goods from their homes.”
The drop in consumer spending, though, could be worrying to the government who are looking to get the UK economy back on its feet.
It is believed the Treasury could therefore enact a variety of measures to encourage Britons to spend, once the country begins to slowly open up again from this month.
Previous debts from Britons appeared to be increasing year on year, and data showed borrowing surpassed levels recorded before the 2008 financial crisis.
The Chancellor, Rishi Sunak, has previously alluded to the dire situation the UK economy is likely to face in the coming months.
Speaking to the Lords Economic Affairs Committee, Mr Sunak said: “We are already seeing that in the data and no doubt there will be more hardship to come.
“We are likely to face a severe recession, the likes of which we haven’t seen and of course, that will have an impact on employment.”
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