UK Economy

Written by Leigh Foster

Another quarter and another update on where the UK economy is at right now. Below I have focused on two key areas that are being spoken about at the moment – Personal and business borrowing and the working from home model.

Households and businesses are borrowing more since the coronavirus (Covid-19) pandemic

Since the coronavirus (COVID-19) pandemic began, there has been a rise in the availability of loans to households and businesses, which contrasts with the experience of the 2008/2009 worldwide financial crisis.

Following the pandemic, all types of lending saw a sharp decline in lending on credit cards. One factor might be the build-up in household savings, which may have reduced the need for consumer credit.

In recent months, there has been a sharp rise in cost and price inflationary pressures. Adults have reported using credit more than usual, possibly in response to the rising cost of living. Credit card lending has increased by 10.6% the year in March 2022, in contrast with a falling trend in consumer credit in 2020 and 2021. The ONS ‘Opinions and Lifestyle Survey’ found that 14% of adults used credit more than usual in response to a higher cost of living in May 2022, a rise from 11% in early April 2022.

Over the course of the pandemic, businesses increased their borrowing, particularly for small and medium-sized enterprises and short-term loans. These loans typically contribute a substantial share towards total business loans, reflecting businesses’ reliance on bank lending to manage cash flow and operations.

In 2020, there was a large rise in deposits held by households, to the equivalent of 9% of GDP, which largely reflected the effects of ‘forced’ savings in response to coronavirus restrictions. Businesses also increased their deposit holdings to 7.2% of GDP, which may have been a cautionary response to more uncertain business conditions.


One in five businesses with 10 or more employees using or intending to use a home working business model permanently

In early June 2022, businesses in the UK were asked whether they were using, or intending to use, home working as a permanent business model.

One in five (19%) of those businesses with 10 or more employees reported that they were.

In early June 2022, the percentage of businesses with 10 or more employees who reported that they were using, or intending to use, increased home working as a permanent business model remained broadly stable compared with early April 2022.

The main reason these businesses reported that they were using, or intending to use, increased homeworking was improved staff well-being, at 79%. However, this percentage has decreased from 83% reported in early April 2022.

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