PwC Precious Plastic 2013: Student debt accounts for the first increase in unsecured borrowing since the financial crisis

Published at 00:01 AM on 25 November 2013

  • UK households have paid off a quarter of their unsecured debt since 2008 – average household debt now around £5,900 (excluding student borrowing)
  • Consumers remain vulnerable to rate rises: 1% increase in borrowing costs could result in an extra £550 for households to pay a year
  • More than a quarter remain worried about their ability to repay their debts, as improved economic outlook fails to feed through to an increase in credit confidence
  • 42% intend to save more, the highest proportion since the financial crisis, rising to 58% among 18-24 year olds 

This year’s £8.5 billion increase in unsecured debt (the first increase since the financial crisis) is due to a huge rise in student borrowing, according to PwC’s latest report on the consumer credit industry, ‘Precious Plastic 2013’, published today.  PwC analysis of official data also reveals that the average value of a student loan has increased by more than 2000% since the early 1990s to close to £8000 today.

According to the report, stripping out student debt reveals that underlying unsecured consumer debt remained flat in 2013 at an average of around £5,900 per household although average household debt has dropped by around 25% since the start of the crisis in 2008.

Simon Westcott, a director in PwC’s financial services practice, commented:

“UK households paying off a quarter of their debt since 2008 is a big milestone which shows that perhaps we are changing our ways, and are focusing on paying off what we owe and  saving more for the future.

"Although student loans are provided on very favourable rates and repayment terms, this significant increase in student debt is likely to have profound effects on graduates’ future borrowing and consumption patterns. 

“With house prices continuing to rise ahead of earnings, and their debt levels increasing, new graduates are likely to find it more difficult to get onto the property ladder, which could start to contribute to the erosion of the UK’s home ownership culture as we breed a new generation of long term renters.  The ability and appetite of graduates to take on unsecured debt will also be affected.”

 Traditional forms of lending, which include credit cards, personal loans and overdrafts, continue to decline, falling by about 1% in 2013.  In contrast, newer forms of borrowing, such as payday lending and peer-to-peer lending, rose by around 14%, but still represent a very small proportion of overall consumer borrowing (around 1%).

Credit card write offs, which peaked in 2010 at £5.3 billion, and represented close to 10% of outstanding balances, have fallen dramatically.  In 2013, write offs fell to less than 3.5% of outstanding balances, the lowest level in over a decade.

Simon Westcott, a director in PwC’s financial services practice, said:

“Although still relatively small in the context of overall consumer debt, the continued growth in newer forms of borrowing highlights a shift in borrowing habits towards smaller and shorter term loans.  Pressure on larger mainstream lenders to provide these types of lending products is likely to increase over the coming months and years.”

The PwC credit confidence survey of more than 2,000  people across Great Britain was carried out twice for this report, to compare consumer confidence when the economic outlook was still relatively gloomy to now, when the outlook is starting to improve - Once in Q1 (February 2013)   and then in Q3 (August 2013).

The results revealed that despite the improving economic outlook, there has been no real improvement in credit confidence since the crisis.  More than a quarter (26%) of respondents are worried about their ability to meet repayments in future (compared to 27% in 2008), 34% expect their pay to be frozen in the next year (compared to 28% in 2009) and 15% remain worried about losing their job in the next year (compared to 18% in 2008).

On a more positive note, the overall number of people needing to use credit for essential items has fallen to 13% (compared to 15% in 2011), and among 25-34 year olds the number has fallen from a staggering 26% in 2012, to 15% this year.

However, British consumers remain vulnerable to rate rises.  We calculate that with all other things being equal, a 1% increase in borrowing costs would result in the average household needing to pay an extra £550 a year in interest payments to service their debts.

Simon Westcott, a director in PwC’s financial services practice, concluded:

“Having first enjoyed the benefits of more than a decade of growth, then navigated the financial crisis and its immediate aftermath, the UK consumer credit and retail banking market is now entering a new and very different era.

“Even with the better economic outlook, relatively high levels of existing debt and the continued reduction in real incomes are leaving people cautious about further borrowing.  Graduates are saddled with especially high levels of debt, which could hold back their appetite for mortgages and other forms of credit as they approach what should be their peak years of spending and investment.

“Growth will be hard won in this market, forcing lenders to compete more for a limited pool of lending.  The businesses that come out in front will deliver the good customer outcomes that both regulation and market competition demand by shifting away from a focus on simply selling products  to a more customer focused approach.”



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Media Contact:

Katherine Howbrook, PwC media relations, Tel: 020 7212 2711/07595 069 737, Email: [email protected]



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© 2013 PwC. All rights reserved.


About PwC

At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see for further details. © 2016 PwC. All rights reserved

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