Brexit

Consumer Lending In UK Declines Amid Brexit Uncertainty

The pre-Brexit decline in the U.K. economy is showing further signs as lending to consumers in the country increased at the slowest pace in close to four years.

Reuters, citing the Bank of England data, reported the growth rate for unsecured consumer lending increased 7.1 percent in October, down from 7.4 percent growth in the year-earlier period. It marks the slowest growth rate since March 2015, noted the report. What’s more, the Bank of England said the mortgages that got approved during the year declined to 63,728 in November, which is the smallest number since April and is lower than the 66,709 approved in October. It is also lower than what economists polled by Reuters were expecting, noted the report. Net mortgage lending, which follows behind mortgage approvals, came in at 3.453 billion pounds in November compared to 4.089 billion pounds in October, noted the report.

The economic data comes amid warnings from Bank of England Governor Mark Carney, who said in December that if there isn’t an orderly exit from the European Union, the prices for houses in the U.K. could fall by as much as 30 percent. The Bank of England noted that demand for consumer loans has been hurt by the uncertainty surrounding the Brexit. The demand, noted the Bank of England, could improve if the Brexit plans are more clear. The report noted that the 924 million pound increase in consumer lending was a little under what economists were forecasting.

It’s not just consumer lending and real estate that could be harmed if the Brexit is not done in an orderly fashion. According to a report in December, the European Banking Authority warned that payment companies residing in the U.K. aren’t prepared for the chance of a no-deal Brexit.  In the European Union’s watchdog for the payments industry — the Risk Assessment Reports, which it releases each year — it said it was concerned the smaller and less sophisticated payment companies don’t have plans in place to deal with a no-deal Brexit. The regulator said the lack of contingency plans from payment and e-money firms stands out as something to be concerned about.

 

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