UK debt 'double Europe average'

Britain has become the debt capital of Europe

People in the UK are borrowing on average almost twice that of citizens in other western European countries, a report has found.

Unsecured UK lending, such as credit cards, was £216bn ($408bn; 319bn euros) in 2005 - more than a third of all new non-mortgage borrowing in Europe.

The average British resident owes £3,175, business research firm Datamonitor said.

Total UK personal debt, including mortgages, is about £1.2 trillion.

The report, which looks at the market for borrowing via personal loans, hire purchase, credit cards and overdrafts in 16 European countries, said that the UK had an "insatiable appetite for credit".

The average European owed just £1,558 in unsecured debt.

Credit cards

The figures reflect the explosion in borrowing that has taken place in the UK over the last decade.

We use the credit card more than many European countries Consumer Credit Counselling Service

The debt advisory service the Consumer Credit Counselling Service (CCCS) said overuse of credit cards lay at the heart of many of the problems encountered by its clients.

"We use credit cards more than many European countries," said CCCS spokeswoman Frances Walker. "Bank of England figures show that outstanding balances on credit cards have gone up by 383% since 1994."

Although only a small proportion of the UK population has difficulty repaying their borrowings, for those with heavy debts the problem can be huge.

The average debt of clients seen by the CCCS has risen from £27,566 in 2003 to £33,000.

Borrowing power

In terms of fresh lending, the French came an easy second to the UK last year, the report found.

The Germans were second to the UK in terms of the total size of debt they had accumulated.

Although the biggest economies dominate the lending market, it is in the smaller economies of Turkey and Greece that non-mortgage borrowing has been rising fastest.

After recovering from an economic crisis in 2001, new lending in Turkey rose by 52% between then and 2005, with Greece seeing its unsecured borrowing rise by 29% over the same period of time.

Both of those countries also top the league for the speed with which their consumers' outstanding balances have grown.

'Saturation point'

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The report points out that one reason for the position of Turkey is that the country has a very undeveloped mortgage market, so borrowing is dominated by unsecured lending, with credit cards being the most popular form.

The opposite is true in Holland, where unsecured credit as a proportion of all lending is just 5%, and where people often expand their mortgages so they can afford to buy things.

Paul Marsh, a financial services analyst at Datamonitor, said that the UK market was at saturation point.

"The UK is an increasingly difficult place to do business, due to the highly indebted nature of the population," he said.

"Yet in other European countries consumers are not as indebted and the markets are not as sophisticated."