Scots most worried in Britain over Brexit impact on borrowing as more use credit for essentials

Canny Scots are being more prudent but trends suggest there is no room for complacency.

Across the UK , unsecured debt is rising by almost £55,000 per minute - the fastest growth since 2002, reflecting the heightened demand. The unsecured debt pile has also grown at least three times faster than secured debt for each of the last five years. Total levels of unsecured debt are now 30 per cent higher than their pre- financial crisis peak.

Student debt, credit cards and car finance represent more than three-quarters of the growth in unsecured lending.

Shujaat Khan, PwC assurance director, said: “What we need to remember though is that while many Scots, on average and compared to elsewhere in the UK, are doing well when we look at debt-to-income ratios, there will be people out there struggling and we should ensure there are support mechanisms in place for them.

“Equally, as we have seen in previous crises, if one area of the UK is hit hard it can impact on the others.”

Innes Ledingham, PwC consulting director, said: “It appears that people have been relaxing after the pain of the first part of the decade. The rapid increase in unsecured borrowing in recent years reflects a change of attitude on the part of UK households. Following the financial crisis, households reducing their borrowing by around 10 per cent between 2008 and 2012 - or closer to 25 per cent if we exclude student borrowing.

“However, since that period a number of macro-economic factors have combined to create a climate of rising consumer confidence and borrowing. Car finance especially has grown by at least 15 per cent for each of the past five years. This represents the largest increase among the main unsecured lending products and may be an area that needs looking at in the future.”

Shujaat Khan, PwC assurance director, said: “The spending is only set to continue. We project growth in unsecured borrowing will continue over the next three years, albeit at a slower rate, with an unsecured debt pile of around £12,500 per household before we reach 2020.

“If this is an area that looks set to grow over the coming years, there may be some businesses thinking there is an opportunity in this market but there are a number of issues - societal, ethical and financial - that would have to be considered.

“The implications of Brexit on people’s wallets will not be known for a while yet - though we are starting to see some impact - and I suspect we’ll see Scots, where possible, continue to be as prudent as possible.”

Innes Ledingham, PwC consulting director, said: “One area we do need to see more work in is financial education. Across all age groups and unsecured credit types, only around a quarter of people surveyed correctly estimated the true cost of borrowing on everyday lending products.

“The industry, regulators and government need to work together to ensure people are equipped with this crucial life skill, especially as the debt burden increases.”