The Bills Are Now Due

Will Personal debt levels lead to a recession?
Creditman Biz

Top insolvency lawyer comments.

This week has seen the London stock market suffering its worst trading start to a year since records began.

Behind the massive slump were renewed worries about the prospect of a US recession, as markets around the world decided that a package of measures announced by US President George Bush, designed to stave of recession, won't be enough.

Neil Smyth, at Taylor Wessing LLP, explains why recession is a possibility, not only for the US, but also for the UK.

"The risk of recession in the US is the direct result of the sub-prime mortgage crisis caused by personal and consumer debt levels in the US. With ever-increasing levels of personal and consumer debt in the UK, the situation here is becoming alarmingly similar," Neil Smyth comments.

"Even before this week's market slump, lenders within the UK sub-prime market that were used to taking on high-risk debt and had traditionally provided an avenue for those in financial difficulty were restricting their lending criteria, issuing profit warnings, or withdrawing loans for individuals with poor credit histories altogether until market conditions improved."

"On top of that, fuel and food prices continue to rise, council tax increases are on the horizon and borrowing is becoming more difficult and more expensive."

"All the ingredients that have forced the US economy to the brink of recession are also prevalent in the UK."