Household debt blamed for depth of recession

Posted By: James

Tuesday 16th September 2014

Household debt blamed for depth of recession

New research from the Bank of England suggests that the recession was the deepest and longest in post-war history because households were so heavily indebted going into the crisis. Bank researchers said that an analysis of "microdata" on UK households' finances shows that those with high levels of debt in 2008 cut their spending by more, relative to their incomes, than others. And because gross household debt reached a historic high of around 160% of combined incomes in 2007, these spending cutbacks had a profoundly negative impact on demand when the downturn came. This debt overhang increased the depth of the recession and made it much longer than previous ones.

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