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Woodford: UK consumer debt concerns overblown

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Star manager Neil Woodford has dismissed concerns of rising UK consumer debt arguing house prices are rising and the low interest rate environment will be supportive.

UK households have amassed £200bn in unsecured debt and consumer credit is rising at a rate of just under 10 per cent a year, while inflation has seen real wages fall 0.4 per cent.

FCA chief executive Andrew Bailey has urged the Government to take action on consumer credit following meetings with debt charities across the UK as personal loans soar while wages fall.

But Woodford head of investment communications Mitchell Fraser-Jones says consumer debt levels are manageable in the context of household incomes.

He says the UK’s falling savings ratio comes as most households’ primary asset – their home – has been rising.

Figures released last month suggest that UK household savings have been running at up to 10 per cent in recent years, compared to previous estimates which fell to around 5 per cent last year. But Fraser-Jones argues they are not as bad as previously thought due to a change in how the ONS calculates the figure.

Fraser-Jones says despite more hawkish rhetoric from the Bank of England in the face of rising inflation, an interest rate in the near future would not herald the start of meaningfully tighter monetary policy.

“Official data confirms that the UK economy has remained resilient in 2017, despite predictions that the Brexit negotiations would precipitate a collapse in activity,” says Fraser-Jones. “That never seemed likely to us, and the data, thus far, is supportive of our view.”

Fraser-Jones points to better-than-expected retail sales numbers and renewed growth in money supply.

“We remain positive on the outlook for the UK economy – much more positive than the gloomy prognosis implied by market valuations,” Fraser-Jones adds.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Surprising comments in the light of the collapse of Provident Financial share price, the level of consumer credit surpassing 2008 levels and car finance expected to implode! Carney knows this and is using rhetoric to influence behaviour as he knows actual rate rises could crucify and debt riddled consumer led economy.

  2. Any claim that “consumer debt levels are manageable in the context of household incomes” needs perhaps to be made in the context of how many people are entering bankruptcy because they can’t keep up with servicing let alone paying down their unsecured debts.

    At what multiple of nett monthly income does debt become, effectively, too great ever to be repaid?

  3. Bankruptcies up 16%
    CCJ’s up 35%
    Debt relief orders up 22%
    1 in 4 UK households with savings of less than £95
    86% cars sold on hp/pcp
    BoE concerned

    Oh well everyone has their opinion

  4. I’m beginning to think that Mr Woodford is drifting away slowly yet inexorably to a parallel universe.

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