Private‑sector borrowing in the UK, by households and businesses, has been strikingly subdued for more than a decade. Since the global financial crisis, new credit creation has remained low, with total private‑sector debt relative to GDP falling steadily. This restraint has acted as a drag on demand and investment but it also creates room. When private borrowing starts from a low base, it can rise without necessarily sparking instability.
Credit cycles have always mattered to real economic performance. When new borrowing picks up, it tends to drive consumption, business activity and GDP. The absence of this cycle over the past decade has contributed to the UK’s stagnation. But the environment may be changing. Rates have peaked and are expected to fall. Household and corporate balance sheets look more robust. And there is political pressure, ahead of a general election, to shift the tone on growth.
This combination means conditions are aligning for a potential increase in private credit. If that happens, it would not take much to shift growth expectations higher. The market’s focus on fiscal constraints may be missing a more dynamic lever.
Ruffer Investment Company Limited (LON:RICA) is a British investment company dedicated to investments in internationally listed or quoted equities or equity related securities
